Discover Updates US Spending Monitor for May

The shift in spending patterns is taking place against a sour economic backdrop. Though the Monitor recorded a slight overall improvement in economic sentiment in May, the gain barely masked record-high numbers of consumers who said their finances are getting worse (54 percent) and that shortfalls in income would force cutbacks in their current lifestyle (43 percent).

The most important factor in the spending outlook appears to be the record-high price of gasoline. Last year at this time, only 23 percent of the country said they spent more than $200 a month on gasoline. This May, with gas selling at averages topping $4 a gallon in some regions, nearly 36 percent report having to spend at the $200 level or higher each month to fuel their vehicles.

The price of gasoline has caused 54 percent of the country to reduce living expenses to cope. In addition, 59 percent of consumers – including 43 percent of the country’s higher-income population – are changing summer vacation plans in response to rapidly rising energy costs.

“Summarizing a year’s worth of polling on consumer spending, it seems clear that U.S. consumers are no longer choosing to spend more, but are being pressured to spend more due to record-high oil and food prices,” said Margo Georgiadis, executive vice president and chief marketing officer for Discover Financial Services. “The change in patterns is most dramatic at the category level the Monitor has followed as people have shifted their spending emphasis from ‘wants’ to ‘needs’.”

“Consumers have been resilient in the wake of high energy prices, putting their money where their needs are, and cutting back on discretionary spending to balance their budgets,” said Georgiadis. “But the cutbacks do not help a struggling economy, and as gas prices continue to break records, consumers are showing signs that their budgets may be stretched a little too thin.”