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Consumers' economic confidence grows, but nervousness lingers

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Consumers may be increasingly confident that the economy is on the mend, but that doesn't mean they are in a hurry to resume spending.



Consumers gained confidence in the economy in August, according to The Discover U.S. Spending Monitor. 

The latest Discover U.S. Spending Monitor survey, released Wednesday, indicates that although consumer confidence in the economy grew in August, more than half of consumers still say they plan to cut back on unnecessary spending -- such as going out to dinner, movies and sporting events -- in the month ahead.

"There was definitely a positive turnaround in consumer attitudes toward the economy and their personal finances in August," Julie Loeger, senior vice president of brand and product development for Discover, said in a company press release. "The rise in the stock market and stable gas prices may have given consumers a reason to believe things are improving and the ability to save and invest more. But improved economic and financial attitudes has not translated into increased consumer spending, a cause for concern for retailers counting on revenue from back-to-school shopping and as the holiday shopping season approaches," Loeger said.

Discover's fears could soon be confirmed: Analysts expect weak back-to-school sales this year, with Thomson Reuters calling for a 3.8 percent decline in year-over-year sales at big chain stores for August, according to a Wall Street Journal report.

The Discover U.S. Spending Monitor is a monthly index of consumer attitudes regarding expenditures, the U.S. economy and personal finances, conducted through a random sampling of 8,200 U.S. adults. The release of the August data comes just one day after an annual J.D. Power and Associates survey showed Discover maintained the second-highest ranking for satisfaction among U.S. credit card issuers.

As the summer wound down, some consumers apparently warmed to the economy's prospects for recovery. Among those surveyed, 31 percent of consumers said economic conditions were improving and just over 21 percent said their personal finances were improving, the highest number reported since August 2008. Those overall favorable attitudes were summarized by a Spending Monitor index that rose 3.5 points in August to 87 points out of a possible 100.

At the same time, 46 percent of consumers feel that economic conditions are getting worse, compared against 65 percent of consumers who felt economic conditions were worsening in August 2008. Additionally, 46 percent of consumers say their finances are headed in the wrong direction, marking the lowest reading on that front since December 2007.

But even as the economy recovers, workers appear unlikely to spend their paychecks for a night on the town or a much-needed vacation. For the third straight month, Discover's Spending Monitor showed that more than 50 percent of consumers plan to reduce discretionary personal spending in the month ahead, with 52 percent of those polled in August saying they plan to spend less on dining out, seeing films and attending sporting events. Additionally, 53 percent plan on lowering home improvement expenses in the month ahead, while 48 percent plan on cutting major personal expenses -- such as vacations -- from their budgets. 

If it's not getting spent, where will consumers' money go? According to Discover, cash will find its way into bank accounts or the stock market, with 58 percent of consumers planning to save and invest the same amount of money or more in the coming month, up 3 points from July.

Discover's research on consumer spending supports Federal Reserve data showing that credit card balances are falling as consumers reduce their debt burdens rather than rack up new charges on plastic. That approach to borrowing marks a fundamental shift from last year, when credit came easy to cardholders untroubled by their ability to repay debt. 

See related: J.D. Power survey shows growing number of people dissatisfied with credit cards, Consumer credit card balances plummet

Published: September 2, 2009


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