Optimism about where the economy is heading also fell in February. Thirty-one percent of U.S. consumers feel economic conditions are getting better, 2 points lower than January. Forty-four percent of consumers feel economic conditions are getting worse, 4 points higher than last month’s Monitor-low of 40 percent.
Consumers’ Discretionary Spending Intentions Show Modest Gains Despite Rising Gas Prices
Despite the decline in economic confidence, consumers’ discretionary spending intentions rose in February.
Overall, 25 percent of consumers expect to spend more in the month ahead, a 2-point rise from January. As well, more consumers are planning to increase their discretionary spending in the following areas:
- 49 percent of consumers are expecting to spend the same or more in the next month on going out to dinner, movies or sporting events, up 3 points from last month
- 49 percent of consumers plan to spend the same or more next month on home improvement purchases, up 3 points from January and the highest number since April 2010
- 52 percent expect to spend the same or more on a vacation or health club membership, up 2 points from last month
But rising gas prices may make any increase in discretionary spending intentions short-lived. Forty-one percent of consumers expected to spend more in the next month on gas, groceries or their mortgage. While down a point from last month, this is the highest February number the Monitor has reported since 2008.
“While the Monitor’s index still stands at its highest level since late 2007, rising gas prices are already affecting consumers’ economic confidence,” said Julie Loeger, senior vice president of brand and product management for Discover. “Nothing hurts economic confidence and consumer spending intentions more than high gas prices, as the Monitor proved three years ago when gas prices reached record highs.”
35% of Consumers View Their Finances Favorably, 48% are Balancing Their Budgets
While rising gas prices correlated to declining consumer views of the economy, for the moment, they are having little effect on consumers’ financial confidence. Thirty-five percent rated their finances as good or excellent, just 1-point lower than last month. There was only a 1-point increase to 45 percent in the number of consumers feeling their finances are getting worse.
More consumers balanced their budgets in February as well. Forty-eight percent of consumers expected to have money left over after paying monthly bills, a 1-point increase from January, however this was the 23rd consecutive month this number has been below 50 percent.
Just 36 percent of consumers anticipate having an added expense or an income shortfall in the month ahead, 1-point higher than January. 51 percent were expecting no added expense or income shortfall, also 1-point higher than last month.