The majority of consumers are cutting back on discretionary spending in response to higher prices for gasoline and food, according to Discover Financial Services.
The Riverwoods, Ill., credit card company said Wednesday that its monthly Spending Monitor index had dropped almost a point in June from a month earlier, to a record low of 85.9, as consumers curtailed spending to offset higher costs for essentials. The index was pegged at 100 when it was introduced last year.
Fifty-five percent of consumers said their total spending increased in June, and 47% said they expected to spend even more this month; 56% said they planned to reduce all discretionary expenses this month, compared with 49% who said the same in January.
Travel plans are one of the areas hardest-hit; 62% said they were changing their vacation plans this summer, and 15% have cancelled vacation plans.
"In the last six months, we've watched consumer optimism about the economy decline sharply and at the same time, witnessed a forced rise in spending intentions spurred by high energy and food prices," Margo Georgiadis, a Discover executive vice president and its chief marketing officer, said in a press release.
These results mirror the attitudes of small-business owners, whose confidence in the U.S. economy plunged in June, according to Discover's Small Business Watch index, released last week.
The index hit a record low last month of 71.8, down 10 points from May.
Seventy-nine percent of small-business owners said the U.S. economy was getting worse, up from 71% who said the same in May, and the highest level since Discover introduced the Index in August 2006, when it was pegged at 100.
Just 8% of respondents said they planned to hire people in the next few months, while 10% expected to reduce their staff and 79% said they were making no changes.