Higher Prices Sink Consumer Spending, US Outlook: Survey
Wed, Apr 2 2008, 10:01 GMT

By Riva Froymovich
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--The Discover U.S. Spending Monitor fell to a fresh low in March on increasing concerns over the economy and rising household expenses.

The monthly index fell to 85.1, a full point lower from the previous month and 11 points lower than six months before.

In the accompanying survey of 14,000 U.S. adults, nearly 50% rated the economy as poor - the highest reading on the monitor yet. Also, 73% feel that economic conditions are getting worse, and nearly 60% view personal finances as fair or poor. More than half expect personal finances to turn more negative.

"Consumers are extremely concerned about the economy and how they are going to continue to manage rising expense pressures," said Margo Georgiadis, executive vice president and chief marketing officer of Discover Financial Services. "Even upper income groups are hitting new highs in their concerns about the economy and personal finances. This does not bode well for a struggling economy that needs a good dose of consumer spending to help fuel a rebound."

The survey showed a 12 point jump in the number of consumers anticipating higher household expenses next month - 52% from 40% a month earlier. That means less discretionary spending and savings. More than 39% of respondents said they would save or invest less next month, up from 36% in February.

Those earning $75,000 or more are feeling the pinch too - 49% expect to spend more on necessities, 19 points higher than in February and the largest increase since a surge in oil prices in November.

The cutback in discretionary spending and savings did lead to an increase in the number of consumers claiming to have money left over after paying their monthly bills for the first time since September.

By Riva Froymovich; Dow Jones Newswires; 201 938 5063; riva.froymovich@dowjones.com

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