Consumers Maintaining Steady Spending with More Confidence.

Discover U.S. Spending Monitor rises slightly in September 

RIVERWOODS, Ill. -- The Discover([R]) U.S. Spending Monitor(sm) 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.

Spending confidence reached its low point in mid-August, 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 September 26 as consumers continue to be confident in maintaining spending.

Consumers Show a "Steady As We Go" Approach Towards Spending

Nearly 54 percent - 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. But during the same five month period, 28 percent fewer Americans now claim they intend to spend more next month. In May's first Monitor survey, 40 percent of respondents said they would spend more in the month ahead. This number has eroded steadily to 29 percent in September.

"Consumers appear to be showing a 'steady as we go' approach towards spending," said Margo Georgiadis, executive vice president and chief marketing officer of Discover Financial Services. "More consumers plan to spend the same in October versus September. The only sign of spending caution is the continued downward trend in spending more. Consumers willing to spend more dropped 25 percent over the last five months. Whether this trend continues as the holiday shopping season nears remains to be seen."

One statistical support for maintaining spending is the declining number of consumers expecting an added expense or shortfall of income over the next thirty days. The number dropped to 35 percent in September, down from 38 percent 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 percent in September versus 46 percent in August.

Consumers Trim Household Expenses; Maintain Spending on Discretionary Expenses and Household Improvements;

A factor that may have been affecting spending confidence in September is the decreasing pressure that household expenses like groceries, gas and utilities are having on consumers' budgets. In September, over 35 percent of consumers said they would spend more on such expenses next month compared to over 37 percent in August. The change was reflected in an over 1 point increase in those saying they would spend less and a just over 1 point increase in those saying that they would spend the same.

At the same time, consumers are increasingly maintaining their spending on discretionary personal expenses for items like travel, entertainment and education. Just over 45 percent say they expect to spend the same on such expenses next month compared to just over 41 percent in August. But consumers showed less desire to reduce spending in September. Forty percent said they would spend less on discretionary personal expenses, down from 43 percent in August.

"The good news for consumers is that household expenses appear to be having less of an impact this month on their budgets, allowing them to feel more comfortable in maintaining their discretionary spending," said Georgiadis. "The numbers show reluctance from consumers to spend more in these categories, but they are not cutting back, either."

More consumers said they were planning on maintaining spending on household improvements and savings and investments as well. Thirty-six percent said they are expecting to spend the same on household improvement expenses next month, a two point increase from August. Fifty-two percent said they would put the same amount of money into savings next month, up from 51 percent in August.

More Consumers Feeling Confident About Their Budgets Ahead

The amount of consumers managing their budgets to have money left over has been trending upwards since June. The number has risen from 49 percent to just over 52 percent in September. The high was 55 percent reported in May.

"There has been a steady climb since June in the number of consumers who say they have money left over after paying their bills ... and fully 80 percent of those who do have money left over say they will have the same or more left than the previous month," said Georgiadis. "Having money left over affects spending confidence and if this trend continues, consumers may be more likely to increase their spending."

Consumers Still Far More Confident in Personal Finances than Economy

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 percent rated their finances as poor. The number of people who said their finances were the same or getting better was also unchanged at 56 percent. Forty-two percent said they were getting worse, a 1 point decrease.

Only 18 percent of those surveyed for the September Monitor think that economic conditions in the country are getting better, the lowest level the Monitor has reported. One-third of consumers (32 percent) rated the economy as good or excellent in September. That's down from 35 percent in the baseline month of May 2007. But consumers' views towards the economy did not worsen in September, as 57 percent view the economy as fair or poor and 62 percent feel the economy is getting worse. Both these numbers are unchanged from August.

About the Discover US Spending Monitor

The Discover US Spending Monitor released monthly, queried nearly 15,000 adult consumers in August 2007 about spending intentions and capacity. The survey also asked for opinions on the U.S. economy and ratings of personal finances. The survey was conducted by Rasmussen Reports, LLC, an independent survey research firm (www.rasmussenreports.com). It has a margin of error of +/- 1 percent.

About Discover Financial Services

Discover Financial Services (NYSE: DFS) operates the Discover Card with more than 50 million cardmembers, the Discover Network with millions of merchant and cash access locations, and the Goldfish credit card business in the United Kingdom. Discover Financial Services also operates the PULSE ATM/debit network, which serves more than 4,400 financial institutions and includes nearly 260,000 ATMs, as well as POS terminals, nationwide. For more information, visit www.discoverfinancial.com.