Discover® U.S. Spending MonitorSM Falls 1.5 Points in March

Consumer confidence slipped in March after back-to-back gains the previous two months, led by married couples with children at home expressing a significant decline in confidence, according to the Discover U.S. Spending Monitor for March 2010.

Overall, the Discover U.S. Spending Monitor – a poll of 8,200 consumers that tracks consumer confidence and spending intentions on a daily basis – fell 1.5 points in March to 85 (based out of 100). Overall, 49 percent of consumers felt economic conditions were worsening in March, 3 points worse than February. The number of consumers who felt their finances were getting worse also climbed 1.5 points.

The decline in confidence was most prevalent among families. Married couples with children at home showed a 6-point increase in the number who felt economic conditions were worsening. They also showed a 3-point increase in the number who felt their finances were getting worse.

Despite the more pessimistic economic and financial attitudes, the Monitor reported a positive trend toward discretionary spending intent. For the second straight month and only the second time since May 2009, less than 50 percent of consumers plan to cut discretionary spending in the month ahead. And while a majority of consumers plan to keep spending the same in the month ahead, the number of consumers planning to increase discretionary spending has slowly risen since the beginning of the year.

Consumers Indicating Slow Increase in Discretionary Spending, but 57% Percent Plan to Keep Spending the Same

March saw a Monitor-high 57 percent of consumers planning to keep their spending flat in the month ahead, tying last month’s record. But consumers are beginning to think about increasing their discretionary spending. Over the last three months, consumers said they planned to increase spending in the following categories:

• Going out to dinner or the movies (up from 6 to 8 percent planning to increase their spending)
• Making home improvement purchases (up from 12 percent to 14 percent planning to increase spending)
• Spending on vacations or furthering their education (increased from 10 percent to 12 percent planning to increase spending)

Plans to change saving and investing levels stayed flat in March, with 9 percent planning to save and invest more, unchanged from February. And despite a rise in gasoline prices, only 26 percent of consumers anticipated spending more on gas, groceries or their mortgages, also unchanged from last month.

"Since January, consumers have slightly altered their spending behavior,” said Julie Loeger, senior vice president of brand and product management for Discover Financial Services. "More people are planning to increase their discretionary spending – or at least keep it the same – than those who say they plan to spend less. This is the opposite of what we saw for most of 2009 and the beginning of 2010.”

Nearly 40 Percent Expecting an Income Shortfall in the Month

After reaching a Monitor-low 35 percent in February’s survey, the Monitor showed a 4-percent jump in March to 39 percent in the number of consumers expecting an income shortfall in the month ahead.

Families showed an even bigger jump, as 42 percent of married couples with children at home said they expected an income shortfall in the month ahead, a 5-percent increase from last month.

Consumers also had more difficulty balancing their budgets in March than they did in February. Just 46 percent expected to have money left over after paying monthly bills, a 2-point decline from February. It has been a year since the Monitor has showed a majority of consumers having money left over. However, of those consumers who do have money left over, 81 percent plan on having the same or more money left over than the previous month, a 2-point increase from February.

57% Rate the Economy as Poor; Just 32% Rate Their Finances Good or Excellent

A solid majority of consumers, 57 percent, continue to rate the economy as poor. This number was unchanged from February. However, families share a more pessimistic view than the overall population, as 62 percent of married people with children currently rate the economy as poor, an increase of 3 points from February.

Just 32 percent of consumers rated their finances as good or excellent, 1-point lower than last month’s reading. Families, once again, were more pessimistic about their finances than the overall population. Only 31 percent rate their finances as good or excellent, down 2 percent from February.

"Despite consumer spending stabilizing and even showing signs of a slight increase, consumers are still concerned about the economy and their own household finances,” said Loeger. "With families feeling some budgetary pressures, the positive trends we have recently seen in terms of spending may be short-lived.”

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^® 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 8,200 U.S. adults conducted at a rate of 275 per night. In addition to spending, the survey asks consumers their opinions on the U.S. economy and their personal finances. The Monitor began in May 2007 with a base index of 100. Surveys are conducted by Rasmussen Reports, an independent survey research firm (www.rasmussenreports.com).

About Discover

Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of 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 more than 185 countries and territories. For more information, visit www.discoverfinancial.com.