Do ?Expectations? of Decreased Spending Mean Less Spending?

First, survey firm Gallup reported in an April poll that Americans had less money for discretionary spending. Half of consumers told Gallup that as the price of gasoline has increased over the past year, the amount of money they had available for entertainment and recreation had declined.

Then, in a poll released on May 9, Gallup reported that 60 percent of Americans said they were cutting back significantly on their household spending to compensate for the rising cost of fuel.

It seems clear that increasing fuel prices are here to stay and a growing number of Americans have tightened their belts and cut back on spending elsewhere.

Headlines awash in news of unemployment and financial insecurity are another factor influencing consumer budgets. As sentiment of the overall economy has declined throughout the year, consumer expectations of cutting back on their spending have also persisted, according to the Discover U.S. Spending Monitor. In April, the Monitor showed that 57 percent of consumers making under $40,000 a year and 54 percent of those making between $40,000 and $75,000 a year, were planning on curtailing discretionary spending. The Monitor, designed as an Index on consumer spending, has declined more than 14 percent from its initial 100 point start a year ago.

As Americans added $15.29 billion to outstanding credit balances in March – for an annual rate of 7.2 percent – it is difficult to predict whether or not these expectations of reduced discretionary spending will fully materialize. What is certain is that as macro-level factors like the rising cost of fuel stretch household budgets, such issues will continue to make for great press.