Their growing pessimism toward the economy and their finances has more consumers planning to cut back on spending overall.
Anticipated Spending Falls for First Time Since February; Majority of Consumers Planning Cutbacks on All Discretionary Purchases
The number of consumers expecting to spend more in the month ahead fell to 21 percent in July, a 2-point decrease from June and the first drop since February. The fall coincided with a 6-point decrease in the number of consumers expecting to spend more on household expenses like gas and groceries. For July, only 29 percent of consumers expected to spend more on household expenses. That’s a significant change year-over-year. Last year at this time, when gas prices were reaching record highs, 57 percent of consumers were planning to spend more on household expenses.
Despite gas prices being well below the records set a year ago, the number of people planning to spend less on discretionary spending in the month ahead is similar to what was reported in July 2008. Fifty-three percent are planning to spend less on discretionary purchases like going out to dinner or the movies, 50 percent plan on spending less on home improvement purchases, and half plan on spending less on major personal purchases like a vacation. This is also the first time since March that a majority of consumers are planning cutbacks in all of the discretionary spending categories surveyed.
“Despite some positive signs in the economy, consumers are showing no intentions of increasing their spending,” said Julie Loeger, senior vice president of brand and product management for Discover. “With a Monitor-low 32 percent feeling their personal finances are good or excellent, it is no surprise that consumers are continuing to cut back.”
The cutbacks consumers are making toward discretionary spending aren’t having a positive effect on consumer savings either. Forty-two percent expect to save or invest less in the month ahead, tying a Monitor high, while only 9 percent expect to save or invest more, a Monitor low.
Monitor-Low 47 Percent Expect to Have Money Left Over After Paying Monthly Bills
For the second straight month, a Monitor-low 47 percent have money left over after paying monthly bills. This is the fourth straight month this number has fallen below 50 percent. Of those who do have money left over, only 10 percent plan on having more money left over, tying a Monitor low and 2 points lower than June.
On a positive note, for the seventh straight month, less than 40 percent of consumers say they are expecting an added expense or an income shortfall in the next 30 days.
Majority of Consumers Feel Economy, Personal Finances are Getting Worse
For the first time since February, there was an increase in the number of consumers feeling economic conditions are worsening. Fifty-two percent feel economic conditions are deteriorating. This is the highest this number has been since March.
An increasing number of consumers also are concerned over the direction of their personal finances. Fifty-one percent feel their finances are getting worse, a 2-point increase from June and also the highest this number has been since March.
“The optimism consumers showed about the economy during the spring has faded during the summer,” said Loeger. “Unemployment is still rising and while some are saying the worst is over, the majority of consumers surveyed by the Monitor in July currently don’t feel that way. Until they do, consumers are unlikely to start spending again.”
