The drop in economic confidence also appeared to have little effect on consumer attitudes toward personal finances. Thirty-three percent currently rate their finances as good or excellent, the same number reported last month.
But the reversal in consumer attitudes toward the economy appears to be affecting discretionary spending intentions. Higher gas prices, along with uncertainty as to whether the economic recession has bottomed out has consumers either holding the line or cutting their discretionary spending intentions in the month ahead.
Anticipated Household Expenses Rise for the Fourth Straight Month, Majority of Consumers Planning to Spend Less on Discretionary Purchases
The number of consumers expecting to spend more in the month ahead rose to 23 percent in June. This is the highest this number has been since November 2008. The rise coincided for the second straight month with an increase in the number of consumers expecting to spend more on household expenses like gas and groceries. For June, 35 percent of consumers expected to spend more on household expenses, a 5-point increase from May and a 10-point increase in the last two months. June saw the highest gas prices of the year nationwide.
To adjust for an increase in household expenses, consumers planned cutbacks on discretionary purchases like going out to dinner or the movies. Over half, 51 percent, plan to spend less in the month ahead on discretionary purchases, a 2-point increase from the previous month. Half of consumers are also expecting to spend less on home improvement purchases, the same as last month, and 48 percent of consumers said they’ll be spending less on major personal purchases like a vacation, also the same as last month. Even consumer savings wasn’t immune to possible cutbacks, as 40 percent of consumers planned on saving and investing less in the month ahead, a 2-point increase from the previous month.
“The optimism we were seeing from consumers in terms of the economy over the past few months may have hit a roadblock in June,” said Julie Loeger, senior vice president of brand and product management for Discover Financial Services. “With unemployment still rising and uncertainty as to whether the economic recession is ending, consumers are seeing no reason to change the spending restraint they’ve exhibited over the last several months.”
Less Than Half Have Money Left Over
For the third straight month, less than half of consumers, 47 percent, have money left over after paying the monthly bills, 1-point lower than the previous month. Of those who do have money left over, 79 percent plan on having the same or more money left over than the previous month, a 1-point increase from the previous month.
A constant bright spot for the Monitor has been the fact that over the last six months less than 40 percent of consumers say they are expecting an added expense or an income shortfall in the next 30 days. This trend continued in June with 39 percent saying they were expecting an added expense or income shortfall.
Current Economic and Financial Conditions Still Dragging on Consumers
Current economic and financial conditions are still a big concern for a majority of consumers. Fifty-nine percent currently rate the economy as poor and only 8 percent of consumers feel economic conditions are good or excellent. Compared to a year ago when gas prices were touching $4 per gallon, 15 percent of consumers still felt the economy was good or excellent while 54 percent felt it was poor.
While the number of consumers rating their finances as good or excellent remained unchanged at 33 percent in June, this number is 5 points lower than a year ago. Forty-nine percent feel their finances are getting worse, also unchanged from the previous month.
“Unemployment is the highest it’s been in 26 years and higher gas prices have forced consumers to keep a tight budget. It is no wonder consumers are concerned about the economy and their finances,” Loeger said. “But for the second straight month, less than half feel economic conditions are getting worse, a sign that consumers are hopeful the worst of this economic recession has passed.”
