Significant Increase in Holiday Spending Year-Over-Year, but Consumer Confidence Declines
RIVERWOODS, Ill.--(BUSINESS WIRE)--After reaching a 3-year high in November, consumer confidence slid in December, as more Americans rated current economic conditions and the state of their personal finances as poor, according to the Discover U.S. Spending Monitor.
“We typically see a big drop in spending intentions for the month of January, as the holidays conclude and consumers tighten their belts”
“We typically see a big drop in spending intentions for the month of January, as the holidays conclude and consumers tighten their belts”
The Monitor, a poll of 8,200 consumers tracking confidence and spending intentions on a daily basis, gave back the gains it made in November, dropping 4.3 points to 87.5. Fifty-six percent of consumers currently rate the economy as poor, a 2–point increase from November. Only 29 percent of consumers feel economic conditions are getting better, down 2 points from November.
Consumers also soured on their personal finances in December. Twenty-six percent, the most since December 2009, rated their finances as poor, up 3 points from November. More consumers also feel their finances are getting worse; 46 percent say their finances are getting worse, up a point from the previous month.
While views of current economic conditions and personal finances this month drove the index downward, some of that movement can be explained by January spending intentions. Thirty-three percent of consumers say they expect to spend less in January, compared to 18.5 percent who said so in November, as the country headed into the holiday spending season.
“We typically see a big drop in spending intentions for the month of January, as the holidays conclude and consumers tighten their belts,” said Julie Loeger, senior vice president of brand and product management for Discover. “However, there’s no question that views on the state of the economy soured a bit this month.”
Holiday Spending Intentions up 4 Points from a Year Ago, but High Gas Prices May Have Prevented Bigger Increase
In December 2009, only 10 percent of consumers were planning to spend more on holiday gifts than the previous year. In 2010, this number rose to 14 percent. Furthermore, only 57 percent planned on spending less on holiday gifts this year, 7 points lower than in 2009.
But high gas prices may have prevented more consumers from increasing their holiday spending. In polling done over the final two weeks of December, the Monitor reported that 47 percent of consumers spent less on gifts this year due to the high cost of gasoline. Forty-three percent said high gas prices did not affect how much they spent on gifts.
Post-Holiday Spending: Consumers Planning Discretionary Cutbacks
Heading into January, more consumers are planning to trim their discretionary expenses, not unexpected, as the Monitor reported similar increases during this time since its inception three years ago.
But compared to a year ago, fewer consumers are planning to cut discretionary spending heading into January in the following areas:
- Going out to dinner or the movies: 52 percent plan to spend less next month, one point lower than 2009.
- Home improvements: 50 percent plan to spend less, down 3 points from 2009.
- Vacation or gym membership: 48 percent plan to spend less, down 3 points from 2009
The fact that fewer consumers are planning to trim their discretionary spending compared to a year ago is in contrast to the significant post-holiday spending cuts the Monitor reported that consumers made in 2008 and 2009.
Only 46% Have Money Left Over After Paying Monthly Bills
Holiday spending may have played a role in the drop in the number of consumers having money left over after paying monthly bills. In December, just 46 percent reported having money left over, 3 points lower than November. December marked the 21st consecutive month this number has been below 50 percent.
Seventy-three percent of those who do have money left over after paying monthly bills planned on having the same or more money left over than the previous month, a 7-point drop that more than likely is attributed to holiday spending. The Monitor reported a similar drop in 2009.
However, 42 percent of consumers are expecting an income shortfall in the month ahead, an increase of 2 points from the previous month and the same number reported in December 2009.
For more Discover U.S. Spending Monitor survey data, charts and information, please visit www.discoverfinancial.com/surveys/spending.shtml.
About Discover U.S. Spending Monitor
The Discover® U.S. Spending MonitorSM is a monthly index of consumer spending intentions and capacity that is based on interviews with a random sample of 8,200 U.S. adults conducted at a rate of 275 per night. In addition to spending, the survey asks consumers their opinions on the U.S. economy and their personal finances. The Monitor began in May 2007 with a base index of 100. Surveys are conducted by Rasmussen Reports, an independent survey research firm (www.rasmussenreports.com).
About Discover
Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discoverfinancial.com.
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