No Relief for U.S. Consumers

By Paul Carton and Jean Crumrine

The tiny signs of stabilization we picked up in our January consumer spending survey proved extremely short-lived.

ChangeWave's February survey results point to yet another leg down in U.S. consumer spending going forward. Consumer sentiment has also taken a big hit, as 2-in-3 respondents said they now believe the overall direction of the U.S. economy is going to worsen during the next 90 days.

The ChangeWave survey of 2,701 U.S. consumers was conducted Feb. 2-9.

Grim Spending Outlook

While our January consumer survey contained intriguing signs of a leveling off in the rate of spending decline, the February results show a reversal and represent the worst spending outlook ever recorded in a ChangeWave survey.

Sixty-one percent of U.S. respondents said they'll spend less money during the next 90 days -- four points worse than our early January survey.



Just 12% said they'll spend more money -- one point worse than previously.

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A Decline in Consumer Sentiment and Expectations

We also asked respondents about their impressions of the economy, and found that consumer sentiment and expectations have turned considerably more negative.

Sixty-four percent of respondents said they think the overall direction of the U.S. economy will worsen during the next 90 days -- eight points worse than a month ago. Only 8% said they believe the economy will improve -- a four-point decline to the lowest reading since we began asking this question.



Other sentiment indicators are even less encouraging:

• Only 14% said they are more confident in the U.S. stock market than they were 90 days ago -- 12 points worse than the previous survey. And 42% said they're less confident, which is 11 points worse than previously.
  
  
• Fifty-nine percent of respondents reported they are dissatisfied with their personal finances -- one point worse than January. Just 4% said they are very satisfied.
  

Worried About Their Nest Eggs

For the sixth consecutive survey since July, saving more money (up one point to 42%) has risen as a key concern and is now one of the top reasons why consumers said they are spending less. Reducing debt (down one point to 35%) also remains a top reason.

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But the No. 1 reason cited is reduced income (44%), which surged six points since January alone.



This astonishing jump in such a short time highlights the serious impact the financial crisis is having on consumers.

Where Is Spending Slowing Most?

New record lows for a ChangeWave survey have been recorded in consumer electronics spending and restaurant spending. Durable goods for the home have also taken a big hit.

Interestingly, for the second survey in a row, we've picked up stabilization in household repairs/improvements spending. One explanation for this may be that some consumers made home improvements their New Year's resolution.

Retail Store Trends

Our latest survey results show the United States has hit the point in the recessionary cycle where even the mightiest of retailers are being brought to their knees.

Case in point: Costco (COST), which has already experienced a significant drop in its growth rate in recent months. Nonetheless, the plunge during the past month (-5) appears particularly unnerving, and is the biggest downward move we've seen so far for Costco.

Wal-Mart (WMT) has performed admirably during most of this same time period, but it too appears to be hitting a wall going forward. Only 13% of consumers said they'll spend more at Wal-Mart, while 11% said less, which is a four-point plunge since January.

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Not surprisingly, the greatest weakness going forward is among traditional retailers -- led by Macy's (M) (-13) and Sears (SHLD) (-13). Target (TGT) (-10) has also taken a huge hit in recent weeks, falling three points.

Home Entertainment Shopping

On the home entertainment front, even as Circuit City (CCTYQ) (down four points to 3%) sells off its remaining inventory, Best Buy (BBY) (unchanged with 38%) continues to show few signs of any windfall from the shutdown of its rival. Its market share remains significantly below that of a year ago (-7).

Apple (AAPL) (down two points to 9%) and Target (down two points to 6%) have also experienced declines since January in the home entertainment market.

Amazon.com (AMZN) (25%), however, continues to hold its own, up one point from previously.

Tough Times

Our February survey results show an overall spending environment that remains fiercely negative, as the tiny signs of stabilization we saw last month proved short-lived.

Economically speaking, the honeymoon period for the new U.S. administration appears to be over. Not only are further spending declines in store for the next 90 days, but consumer confidence and expectations for the future have worsened considerably.

After 13 months of recession, U.S. consumer spending is still trending downward.

Click here to check out more of the latest ChangeWave research findings.

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Paul Carton is the Director of Research for the ChangeWave Alliance Research Network. Jean Crumrine is an Associate Director of Research. The Research Network is a group of 20,000 highly qualified business, technology and medical professionals -- as well as early adopter consumers -- who work in leading companies of select industries. ChangeWave surveys its network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.

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