RIVERWOODS, Ill. -
Consumers Show Growing Pessimism, Reluctance To Spend And Borrow In Survey
Although there was a slight uptick in attitudes during September, a new survey shows consumers saying they are willing to continue spending has dropped 25% over the past five months.
The Discover U.S. Spending Monitor rose slightly in September as consumers reported having more money left over after paying debts and less concern about unexpected expenses or shortfalls in income. The Monitor stood at 95.9 for the month compared to the August level of 94.8. "Noticeably unchanged from a month ago was the lower level of economic and personal financial confidence registered by the 14,000 consumers who participated in this month's survey," said the report's analysts.
Spending confidence reached its low point in mid-August in the survey, but since then a steadier, somewhat more upbeat view has emerged. On a week to week basis, the Monitor is five points higher now than the low point in August and three points higher than it was the week ending September 5. Weekly readings topped 97 the week ending Sept. 26 as consumers continue to be confident in maintaining spending.
Among the findings:
* Nearly 54%, the largest since surveying began in May, now say they intend to spend the same amounts of money in the month ahead. That's up nearly nine points from May.
* Over that same five month period, 28% fewer Americans now claim they intend to spend more next month. In May's first Monitor survey, 40% of respondents said they would spend more in the month ahead. That number has eroded steadily to 29% in September.
* One statistical support for maintaining spending is the declining number of consumers expecting an added expense or shortfall of income over the next 30 days. The number dropped to 35% in September, down from 38% in August and the lowest number since the Monitor's inception.
* Although higher than the Monitor average, married people with children showed the biggest decline in the added expense/shortfall of income category dropping to 42% in September versus 46% in August.
* A factor that may have been affecting spending confidence in September is the decreasing pressure that household expenses such as groceries, gas and utilities are having on consumers' budgets. In September, more than 35% of consumers said they would spend more on such expenses next month compared to over 37% in August.
* At the same time, consumers are increasingly maintaining their spending on discretionary personal expenses for items such as travel, entertainment and education. Just over 45% say they expect to spend the same on such expenses next month compared to just over 41% in August.
* Consumers showed less desire to reduce spending in September. Forty percent said they would spend less on discretionary personal expenses, down from 43% in August.
* The amount of consumers managing their budgets to have money left over has been trending upwards since June. The number has risen to 52% from 49%. The high was 55% reported in May.
Consumers continue to view their personal finances better than they do the economy. Forty-one percent rated their personal finances as good or excellent, unchanged from last month while 19% rated their finances as poor. The number of people who said their finances were the same or getting better was also unchanged at 56%. Forty-two percent said they were getting worse, a one-point decrease. Only 18% of those surveyed for the September Monitor think that economic conditions in the country are getting better, the lowest level the Monitor has reported.
Rasmussen Reports conducted the survey. For info: www.discoverfinancial.com.
2. Small Biz Not Expected To Borrow
Anxiety Seen In The Numbers
SAN FRANCISCO- U.S. small businesses are cautiously optimistic about their business prospects, but remain concerned about the increasing costs of energy, rent and mortgages, according to a new a newly released Visa Small Business Spend Insights report.
Visa found during the second quarter of 2007 that nearly half of the small business owners surveyed expect an increase in profit and revenue over the next six months.
"Small business owners are clearly anxious about rising costs and are addressing this issue by focusing on improving their short-term cash flow in these challenging economic times," said Raghav Lal, senior vice president, Small Business Products, Visa USA.
Among the findings:
* 44% of small business owners surveyed expected an increase in revenues over the next six months, while only 13% expected revenue to decrease in the same period.
* 40% of small business owners surveyed expected an increase in profits over the next six months, while only 22% expected lower profits over the same period.
* Small businesses expect borrowing to remain low. Only 19% expect to borrow money to enhance cash flow over the next six months.
* 72% of surveyed small business owners anticipating an increase in energy spending over the next six months.
* 23% of small business owners are concerned that rent and mortgage costs will rise in the near future. Sole proprietors demonstrated the largest shift in concern.
* 23 percent of small business owners surveyed expressed concern about attracting new customers over the next six months. The average spend per transaction on Visa Business cards for advertising, management consultants/public relations, publishing and related expenses increased by 8% for the 12 months ending June 2007, Visa reported.
* 58% of small business owners surveyed expect to slow large capital investments, while 41% expect to slow small capital investments.
For info: www.usa.visa.com/business.
3. Avg. Access Per Household Is $26,317
Credit Crunch? Plenty of Revolving Credit Available
NEW YORK - The talk may be of a "credit crunch," but U.S. households have access to more credit than ever, according to a new survey.
Mail Monitor, a credit card direct mail tracking service offered by the research firm Synovate, is reporting that U.S. households now have access to an average of $26,317 of revolving credit on their cards while average incomes are around $60,000. Andrew Davidson, VP - competitive tracking services for Synovate's US Financial Services Group, said the ratio of available credit to income has been steadily climbing, in line with inflation, over the past four years.
"However, in the last 12 months, it jumped from 50% to 56%," said Davidson. "This 6% increase is more than double the annual rate of inflation and is a direct response to the current economic climate."
While the housing market cooled and interest rates began to rise, cardholders have been adding to their revolving debt, according to the analysis. In turn, issuers have responded by making more credit available.
"Revolving balances on credit cards are at an all time high with U.S. households now owing an average of $6,970 up from $5,084 just four years ago," Davidson said, adding that consumers now are carrying more cards from different issuers than ever before, up to an average of 2.8 cards in the most recent survey from 2.4 cards four years ago.
"For a market considered to be saturated this represents significant growth," Davidson observed. "Credit card issuers continue to be more and more creative with their offerings and the increase in solicitations for cards promoting loyalty points and/or cash back has led to additional cards in the wallet."
According to Synovate, with U.S. households "now having more access to credit than ever before, and more foreclosures on the horizon, the concern is that revolving balances will continue to rise while incomes remain flat." The company predicted that many households will have difficulty freeing themselves from mounting debt, but that the recent cut in the Fed funds rate should help.
Synovate noted its Mail Monitor also tracks the credit card Utilization Ratio, which represents current outstanding balances plus new charges expressed as a percentage of the total credit line available across all credit cards in the household. "The Utilization Ratio is a key indicator of the 'credit health' of the nation as it shows to what extent consumers have maximized their available credit," the company claimed.
Synovate organizes households into five types based on their Utilization Ratio. These are Zero (0% utilization), Light (0%-3%), Average (3%-9%), Heavy (9%-30%) and Ultra (30%+). Ultra Utilization households are more likely to be sub-prime as they have utilized 30% or more of their available credit and have lower than average incomes.
"A figure of 30%+ is considered risky by the card industry as a staggering 83% of Ultra Utilization households carry a balance each month and the average revolving balance is $9,890 up from $8,069 just four years ago," it observed. "Not surprisingly, given that many of these households are fully utilizing their available credit each month, one in four were charged a late or over the limit fee in the past year."
The number of Ultra Utilization households has increased from 22% to 26% over the past four years, Synovate said.
For info: http://mailmonitor.synovate.com.
