Massive Breakdown in U.S. Consumer Spending Going Forward

by: ChangeWave Research

By Paul Carton

ChangeWave’s latest consumer spending survey shows yet another giant downturn in U.S. consumer spending going forward. And relatively speaking, it’s far more pronounced than the October downturn.

The survey of 2,763 U.S. consumers, completed November 3rd, focused on spending patterns for the next 90 days, including the holiday season. Here’s what we found:

Grim Outlook

Nearly three-in-five (59%) respondents now say they’ll spend less money over the next 90 days, 7-pts worse than previously. Only one-in-ten (10%) say they’ll spend more – 8-pts worse than previously.

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“These findings strongly support the thesis that fourth-quarter earnings will be far more painful than currently expected,” said Tobin Smith, founder of ChangeWave Research and editor of ChangeWave Investing.

But why are consumers spending less? Saving More Money (33%; up 7-pts) and Reducing Debt (31%; up 2-pts) were cited as the dominant reasons. Reduced Income (33%; up 7-pts) has also shot up as a main reason.

Weak Outlook Hits All Major Spending Categories:

Spending is down for all consumer categories this holiday season compared to the previous holiday season (Nov 2007 survey). And in nearly all instances, spending is down compared to just six weeks ago (Sep 2008).

Spending on Restaurants/Everyday Entertainment looks particularly weak, down a net 39-pts from a year ago to a new all-time low. Similarly, Consumer Durable Goods is now registering a new all-time low.

But Consumer Electronics remains one of the weakest spending categories of all – a big change from past holiday seasons when a surge in the sector normally occurs at this time of the year. Only 19% say they’ll spend more on Consumer Electronics over the next 90 days compared to 43% who say less – a net 40-pts worse than one year ago.

Double Whammy for Best Buy

In terms of home entertainment shoppers, the findings point to a extraordinarily weak holiday season for Best Buy (NYSE:BBY), with only 44% saying they’ll shop there over the next 90 days – down 7-pts from a year ago, and a 3-pt decline from September 2008.

This is the lowest November reading for Best Buy we’ve ever seen. The electronics giant faces a double whammy – not only is this the weakest consumer electronics season in years, but among those who are buying, large numbers are fleeing Best Buy for the discount retailers.

As the following chart shows, discounters Wal-Mart (NYSE:WMT) (18%; up 5-pts), Sam's Club (12%; up 3-pts) and Costco (NASDAQ:COST) (27%; up 3-pts) are rapidly picking up share in the home entertainment and computer/networking market.

With results like this, it doesn't come as a surprise that Best Buy cut their forecast today on slumping sales and Circuit City filed for Chapter 11 Bankruptcy.

Tiny Uptick in Consumer Sentiment

The survey also asked respondents about their current impressions of the economy – and while consumer sentiment still looks awful, some of these indicators aren’t quite as dire as in September.

A total of 15% now think the overall direction of the U.S. economy is going to improve over the next 90 days – 3-pts better than a month ago. And while a huge 57% believe the overall direction of the U.S. economy will worsen, that number is 9-pts better than previously.

In another small positive, 14% now say they are More Confident in the U.S. stock market than they were 90 days ago, 7-pts improved from previously. Nearly two-thirds (64%) continue to say they’re Less Confident, but that’s also a 5-pt improvement.

But even as the above findings show the slide in consumer sentiment may be starting to stabilize, there are other far less encouraging signs.

  • Two-thirds of respondents (64%) report dissatisfaction with their personal finances, a whopping 15-pt jump since September.
  • In addition, 76% say the current state of the economy is worse than they thought it would be 90 days ago – a 2-pt increase from previously.

Retail Store Trends

For the sixth consecutive survey, Costco (COST; Net Score = +8) and Wal-Mart (WMT; +5) remain the overall retail leaders going forward. Once again, it’s traditional retailers – Sears (SHLD; -13), Bed, Bath & Beyond (BBBY; -12), Macy’s (M; -10), JC Penney (JCP; -9) and Linens N Things (-8) – that are showing the greatest weakness going forward.

In a nutshell, while everyone knows that it’s going to be a tough holiday spending season, these survey results show we’re in the midst of a massive consumer spending breakdown that now has a huge percentage of the U.S. public squeezing all they can out of every dollar.

And that includes gift shopping dollars. By a 12-to-1 margin (48% Spending Less Money vs. 4% Spending More Money) respondents report they’ll spend less money on holiday shopping this season than they did a year ago.

Jim Woods co-wrote this article


This article summarizes the results of a recent ChangeWave survey. ChangeWave runs a research network of 20,000 business, technology and medical professionals -- as well as early adopter consumers -- who spend their everyday lives working on the front line of technological change. For more info on ChangeWave, or to sign up for real-time email

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