financial services

Discover Finds Consumers Holding Line On Spending

As seems to generally be the case with the economy, any relative good news is far outweighed by the bad news.

According to Discover Financial's U.S. Spending Monitor of September, more than half--55%--of U.S. consumers said the economy was doing poorly, and 70% said things were going to get worse. Those percentages are both higher than the previous month's responses.

The ratings were tempered by the fact that several events--Lehman Brothers' bankruptcy, Fannie Mae and Freddie Mac bailouts and other Wall Street concerns--occurred at the end of the month. That week showed a six-point increase in "poor "ratings for the economy. As things developed, that percentage more than doubled--to 13 points--by the end of the month.

"We were headed lower if September was longer," Matthew Towson, a representative for the company, tells Marketing Daily.

That's the bad news. The good news is that consumers are keeping their own personal spending in check. According to the company, fewer than 20% of respondents rated their personal financial picture as "poor" (only the second time this year that's happened), 30% said their finances were good, and 10% said they were "excellent."

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During September, a drop in fuel prices helped consumers keep a lid on their budgets, while continuing to cut back on discretionary spending. "We've noticed that consumers are doing their darnedest to keep budgets in balance, and they've been able to do it month over month," Towson says.

Moving forward, however, things are looking difficult. Nearly two-thirds of consumers (63%) expect to spend the same or less over the next month, and more than half (51%) will cut back on discretionary purchases. Nearly as many (48%) will cut back on major personal purchases.

Such sentiments don't bode well for a quick economic recovery, Towson says. "Discretionary spending has taken a hit, which doesn't help the economy much," he says. "The 'hold the line' mentality doesn't mean good news for retailers."

Nor do some of the other concerns. Some 87% of consumers were worried about rising food prices, and 65% said they have reduced overall spending to cope with rising prices. (The U.S. Department of Agriculture has said food prices could increase 8% this year.) Nearly half (46%) expected household expenses--including energy expenses--to increase.

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