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RIVERWOODS, Ill.--(BUSINESS WIRE)--The Discover U.S. Spending Monitor dipped 2.2 points to 86.5 in September, as consumers grew increasingly concerned about the U.S. economy and worked hard to hold-the-line on future spending plans. More than 55 percent of the nation's adults rated the economy as poor, and nearly 70 percent think it is getting worse. Both measures were 5 points higher than the previous month and both turned increasingly negative as the financial crisis played out.

By contrast, despite the barrage of negative news about the state of financial markets, consumer attitudes about their own finances remained steady, if not slightly improved. Many took advantage of lower gas prices to actively manage their discretionary spending and balance their budgets, giving them sustained confidence in their personal finances. The number that rated their financial situation as poor dropped below 20 percent for only the second time this year, while 30 percent rated their finances as good and 10 percent rated them as excellent, near the year's high.

Economic Confidence Falls Sharply During the Month

News of the demise of iconic financial services companies coupled with failed attempts by the federal government to enact a "rescue" plan, put consumers' economic confidence in a free fall during the course of the month. The Monitor's nightly surveys of 500 consumers tracked the decline beginning with the Chapter 11 filing of Lehman Bros. (September 15). That week, there was a 6-point increase in "poor" ratings for the economy, from 49 to 55 percent, which turned into a 13-point increase, to 62 percent, by month's end.

During the same period, there was a 15-point increase in the number of adults that thought the economy was getting worse. The rise from 64 percent to 79 percent left the measure at its highest ever level for the seven days ending October 1, 2008. That night, the U.S. Senate passed a rescue bill that was subsequently adopted by the U.S. House and signed by the President on October 3.

"The turmoil in the financial sector has led to a substantial increase in consumer pessimism over the economy during September despite the relief lower gas prices have brought to consumers' budgets," said Margo Georgiadis, executive vice president and chief marketing officer for Discover Financial Services. "Fifty-five percent of consumers rate the economy as poor today, double where we were a year ago."

Spending Expectations Continue to Moderate

In the meantime, consumer spending expectations moderated during the month. Like the month before, about two Americans in three (63 percent) were expecting to spend the same or less in the next 30 days.

The return of cheaper fuel - per gallon prices fell to an average of $3.68 a gallon last month from a high in late July of $4.16 - gave consumers a much needed breather from rapidly growing living costs. Once again this month, only 46 percent of consumers were looking ahead to higher household expenses, including energy, 10 points ahead of this time last year, but 10 points lower than it was in July when oil prices peaked.

However, a majority (51 percent) are still expecting to spend less on discretionary personal purchases like eating out or going to the movies. Forty-eight percent are expecting to spend less on major personal purchases, up nearly two points from August, and nearly 40 percent expect to save and invest less in the month ahead, also up two from August. Spending on home improvements showed no change from last month with 49 percent of consumers expecting to spend less in September.

"As consumers remain justifiably concerned over the economy, they continue to hold-the-line on spending, cutting back where they need to in order to make ends meet," Georgiadis said. "This may be unwelcome news to our nation's retailers with the holiday season just around the corner."

Food Prices Causing a Majority of Consumers to Eat Out Less Often

According to the U.S. Department of Agriculture, the consumer price index for food could rise as much as eight percent this year. The rise, though not as abrupt and disruptive as those associated with near term energy prices, is a cause for concern among 87 percent of the country's consumers. In addition, in Monitor interviews with 10,000 consumers this month, 64 percent said they have reduced their overall spending in response to higher food prices.

To reduce their food expense, Americans told the Monitor that they are changing their eating out habits. More than half (55 percent) of the sample said they intend to eat out less often to stave off rising food costs; and nearly 46 percent said that when they do go out, they either look for a less expensive restaurant or choose to order less expensive items from the menu. Since 65 percent of U.S. adults eat away from home once or more a week, the data implies a difficult time for the nation's 945,000 restaurateurs, most of whom are small business owners, and their 13.1 million workers. Throughout the economic downturn, consumers have been intent on cutting back on such expenses.

Balancing Their Budgets Allows Consumers to Sustain Financial Confidence

In September, more consumers had money left over after paying their bills - 52 percent versus 50 percent last month - and just over three out of four (76 percent) of those with money left over had the same or more than they did at the end of the previous month. In addition, the bad news from Wall Street in September did not change the way Americans judge their reserves. Forty-three (43) percent, the same as in August, say they have a safety net of one month or less if they lose their income; 53 percent, also the same as in August, have more. The number of consumers who claim to have enough to maintain their lifestyle for six months has slowly, but steadily increased to 25 percent in September, the highest level it has reached in more than a year.

"By actively managing discretionary spending, consumers have consistently balanced their budgets, which has sustained confidence in their personal finances," said Georgiadis. "Despite their rising concern about the economy over the past year, 40 percent of consumers continue to rate their finances as good or excellent, only two points below where we were last September."

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(R) U.S. Spending Monitor(SM) is a monthly index of consumer spending intentions and capacity that is based on interviews with a random sample of 15,000 U.S. adults conducted at a rate of 500 per night. In addition to spending, the survey asks consumers their opinions on the U.S. economy and on their personal finances. Weekly reports reflect calculations for the seven previous days of interviews, or a sample of 3,500 adults. Surveys are conducted by Rasmussen Reports, an independent survey research firm (www.rasmussenreports.com).

About Discover Financial Services

Discover Financial Services (NYSE: DFS) is a leading credit card issuer and electronic payment services company with one of the most recognized brands in U.S. financial services. The company operates the Discover Card, America's cash rewards pioneer. Since its inception in 1986, the company has become one of the largest card issuers in the United States. Its payments businesses consist of the 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 185 countries and territories. For more information, visit www.discoverfinancial.com.

Source: Discover Financial Services