Discover® U.S. Spending MonitorSM Falls Below 80 for First Time

Business Wire, Dec 10, 2008

Poll: Holiday Shopping Not Likely to Make the Season Bright for Retailers, As Nearly Two-thirds of Consumers Plan on Spending Less This Holiday Season than Last Year

RIVERWOODS, Ill. -- The Discover U.S. Spending Monitor slipped to 79.7 in November, falling below 80 for the first time in its history, as consumer economic sentiment fell to a record low and concern over personal finances reached record highs. Heading into the holiday season, consumers temporarily reversed course on spending from previous months, with an increasing number planning on spending more in December. But the results of nightly surveys of random consumers during November painted a dark picture for retail activity at the onset of the important holiday shopping season. Continued concerns over the economy and personal finances have many more consumers preparing to spend less on holiday shopping than they did last year.

Record Number of Consumers Give the Economy Poor Marks

Sixty-four percent of consumers rated current economic conditions as poor, a record high and a near 30-point increase from a year ago. Consumers did shift their views somewhat on their outlook for the economy with 69 percent saying things were getting worse, 3-points below October's reading. For the second consecutive month, not a single income group appeared to be immune from the pessimism inflicted by current economic conditions. More than 60 percent of consumers in all three income groups polled (under 40k, 40k-75k, over 75k) rated the economy as poor.

"It is worth noting that virtually every demographic segment covered by the Monitor is feeling the impact of the crisis in the country's financial affairs," said Margo Georgiadis, executive vice president and chief marketing officer for Discover Financial Services. "Americans at every income level and age, married or not, with kids or not, appear to be unified in their view of the economy: it's poor."

As pessimism has worsened, economic conditions appear to be taking a toll on consumers' personal finances. A record high 62 percent of consumers rated their finances as fair or poor in November and 56 percent reported that their finances were getting worse, which is also a record high.

Despite increasing concern over their finances, a majority (51 percent) of consumers continue to have money left over after paying the monthly bills. This is the eighth consecutive month this number has been over 50 percent. But of those who do have money left over, the number saying they will have the same or more money left over dropped to 77 percent, nearly two points below October's number and the first drop we have seen in five months. Furthermore, the number of consumers expecting an income shortfall or added expense in the coming month increased for the first time in five months to 40 percent.

One reason for the expected added expense and drop in money left over may be that an increasing number of consumers are planning on spending more in December. From October to November, the number of consumers expecting to spend more in the month ahead increased 7 points to 34 percent. Anticipated holiday spending may have something to do with the increase, but when comparing numbers to 2007, there is actually double the number of consumers planning to spend less in December than there were last year. This comes as consumers expect household expenses to decline, hitting a 14-month low.

Consumers Reluctant to Increase Discretionary Spending Despite 4-Year Low in Gas Prices

The Monitor reported that 35 percent of consumers expected to pay more in household expenses in December. This number is 23 points below what was reported in November 2007, but despite the drop (Gasoline prices have fallen to levels not seen since 2004), consumers are reluctant to increase their discretionary spending. From October to November discretionary spending, like going out to dinner or spending on a vacation, edged up only slightly. But when compared to November 2007, the number of consumers planning to spend less on discretionary purchases is up 7 points. Some other numbers include:

* Fifty-two percent planning to spend less on discretionary purchases like going out to dinner or the movies, up seven from November 2007

* Fifty-two percent planning on spending less on home improvement purchases, up seven points from November 2007

* Nearly 50 percent (49%) planning on spending less on major personal purchases like travel or a gym membership, up 7 points from November 2007

"Even though consumers are far less burdened by household expenses than they were a year ago, a majority of them are actively spending less in all discretionary categories," said Georgiadis. "Poor economic conditions and concerns over personal finances have ruled out any possible spending increases for most consumers."

Consumers Planning to Spend Less This Holiday Season and Shopping Earlier

The restraint consumers have applied towards their spending also is reflected in their holiday spending intentions. The numbers show: