Rate of Consumer Spending Decline Stabilizes - Overall Outlook Remains Grim

In the aftermath of the massive consumer spending breakdown seen in our November consumer survey, the December survey does show the rate of decline stabilizing. Nonetheless, the 90-day outlook remains the worst on record in a ChangeWave survey.

Signs of the consumer retreat include record numbers saying they’re spending less because they’re trying to save more money and to reduce debt.

Consumer sentiment has also taken a direct hit since November, with two-in-three respondents now believing the overall direction of the U.S. economy is going to worsen over the next 90 days – 9-pts more than a month ago.

The ChangeWave survey of 2,715 U.S. consumers was conducted December 2 - 9, 2008.

Grim Spending Outlook

Three-in-five (60%) U.S. respondents say they'll spend less money over the next 90 days, 1-pt worse than our previous survey in November 2008. Just 11% say they’ll spend more money – 1-pt better than previously.

Thus after four consecutive surveys of progressively deeper spending contractions, the December results at last show a leveling off in the rate of decline. Still, the 90-day outlook remains astonishingly grim.

The Hunkered Down Consumer

Saving More Money (39%; up 6-pts) and Reducing Debt (33%; up 2-pt) are still dominant reasons given by consumers for why they’re spending less.

Reduced Income (37%; up 4-pts) also remains a top reason – up for the third consecutive survey and a clear sign that the recession is continuing to take an enormous toll on the spending power of consumers.

Retail Store Trends

For the seventh consecutive ChangeWave survey, Wal-Mart (WMT; Net Score = +6) and Costco (COST; +6) remain the retail leaders going forward. However, Wal-Mart shows the most momentum, gaining 1-pt for the second consecutive survey.

Costco, on the other hand has fallen 2-pts since November.

Once again, the greatest weakness going forward is among the traditional retailers – led by Sears (SHLD; -13), Bed, Bath & Beyond (BBBY; -12), Macy’s (M; -10), JC Penney (JCP; -9) and Linens N Things (-8).

Looking ahead, Target (TGT; -7) also shows significant weakness for the next 90 days.

Consumer Electronics and Home Entertainment

We’re at the peak of the holiday season, and so it’s not surprising that Electronics spending has registered a slight uptick for the second consecutive month.

Nonetheless, it remains far weaker than past holiday seasons, with less than one-in-four (23%) saying they’ll spend more on consumer electronics going forward – up 4-pts since the previous survey – even as a whopping 43% say they’ll spend less.

Amazon (AMZN) (23%; up 2-pts) and Apple (AAPL) (11%; up 2-pts) are the clear momentum leaders in terms of home entertainment and networking shopping – while Circuit City (9%; down 5-pts) and Target (5%; down 3-pts) show the greatest weakness going forward.

There continues to be critical warning signs for industry giant Best Buy (BBY). Only 7% say they’ll spend More Money there over the next 90 days than last year, compared to 36% who say they’ll spend Less Money – a net 7-pts worse than previously.

Sentiment Turns Even More Negative

We also asked respondents about their current impressions of the economy, and two-thirds (66%) think the overall direction of the U.S. economy is going to worsen over the next 90 days – 9-pts worse than a month ago.

Only 9% believe the economy will improve, which is 6-pts worse. Moreover, two-thirds (64%) report they are dissatisfied with their personal finances, unchanged from November, while just 4% say they are Very Satisfied – also unchanged.

Bottom Line: The latest ChangeWave survey shows the rate of U.S. consumer spending decline stabilizing, but the 90-day outlook still remains the toughest on record.

An astonishing six-in-ten respondents say they'll spend less money over the next 90 days, while only one-in-ten say they’ll spend more money. Moreover, record numbers report they’re spending less because they’re trying to save money and reduce debt.

Consumer Electronics spending has registered a slight uptick as we reach the peak of the holiday season, with Amazon and Apple the clearest beneficiaries of an otherwise depressed retail environment.

Jean Crumrine co-wrote this article

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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 alerts on the latest survey findings, click here.

Comments

[mollytjm:]

Target is a suprise, though Warren B sold his Target but not Wal-Mart saying that in a bad economy, Wal-Mart would do better. Now that Apple is off the Macworld treadmill in the future, that will help them place their newest in the marketplace when the timing is good...which ISN'T right after Christmas. Circuit City still gives the customer short shrift. They seem to hire people who don't know products very well. Plus, i know people who aren't shopping there because the company is in trouble and they know there's no bringing anything back if the stores close. Lots of speed bumps out there and plenty of crevasses.

2008 Dec 19 08:31 AM

[Walt17:]

Comparing Circuit City and Best Buy: My experience has consistently been that CC staff is easier to find, more willing to help and more knowledgeable than Best Buy staff. As recently as one week ago.

I'm certain it varies by location, but in my area, I wish Circuit City was the company staying and Best Buy was going under.

2008 Dec 19 09:02 AM

[jmmx:]

I really hate to sound the sour note, but I think we ned to take the conclusions here cautiously.

>> "Bottom Line: The latest ChangeWave survey shows the rate of U.S. consumer spending decline stabilizing"

First - this statement is a bit hedged. "the rate of... spending decline"
a) If you are at 10% negative spending level and change to a 12% level, that 2 percentage point change represents a RATE of change of 20% (2 is 20% of 10). Yet a move from 20% to 22% - the same 2 point change is now only a 10% RATE of change.
b) Obviously, as you approach saturation (100%), and 60% is approaching that point, then you can no longer continue to increase at a steep rate.

Second - There is nothing to say that the rate will not change again. If you look at the first chart, Apr- Aug showed a leveling off of sentiment, but was followed by a very rapid rise.

I would suggest that the recent rounds of huge layoffs, and ones that are bound to follow, will create an further increase in the red line of that chart (i.e. more people who are spending less). This will continue until we see a real reversal in the unemployment rate. The Obama team is dedicated to jump-starting the economy, but it will take time for legislation to be passed, implemented, and the work projects to actually begin. My guess is that any significant improvements in the survey will have to wait until the second half of next year -- and that if we are lucky.

2008 Dec 19 04:22 PM

[KenC:]

These surveys by Changewave will always be suspect as long as the charts are misleading by using an X-axis that is not consistent from one date to the next. How can one do any trend analysis when surveys are sometimes one month apart and then 3 months apart. It's nonsense.

2008 Dec 19 04:24 PM

[KenC:]

These surveys by Changewave will always be suspect as long as the charts are misleading by using an X-axis that is not consistent from one date to the next. How can one do any trend analysis when surveys are sometimes one month apart and then 3 months apart. It's nonsense.

2008 Dec 19 04:24 PM

[KenC:]

Uhm, someone tell those people still shopping at Linens n Things that it's gonna be closed forever in less than a week.

Just look at your first chart, I mean without October, you might have seen the leveling off in November, right? What if October said 58% expect to spend less? You could have totally missed it, but we'll never know since you either didn't do a monthly survey, or are choosing to ignore showing it.

Paul, trying getting with the new Millenium and use a modern charting app. The 80s are calling back for their copy of MS Excel.

Amazing how such a HUGE change in consumer sentiment, results in only a tiny percentage change in actual spending.

2008 Dec 19 04:56 PM

[ebworthen:]

"If your charts were done snazzier it would make the bad data look really good." Sheesh.

Yeah, pretty charts will make a difference in what they say.

Retail stores, and malls, are going down the tube.

Kondratieff Winter coming; generational adjustment. Not what I want but what I feel, listen to your gut.

2008 Dec 20 12:00 AM