ChangeWave Survey Shows Continued Deterioration in Consumer Spending

In the old days, they'd cut off the heads of bearers of bad news. Hopefully, you'll spare me.

ChangeWave's latest consumer survey shows a continued deterioration in U.S. consumer spending trends with no signs yet of any bottom. And in a striking finding, the survey results suggest that the government's economic stimulus package is likely to backfire.

The February 18-25 survey of 3,773 consumers focused on spending patterns going forward. Here's what we found:

Nearly two-in-five U.S. respondents (39%) say they'll spend less over the next 90 days than they did a year ago - 5-pts worse than January 2008 and the worst reading in a ChangeWave survey since 2002.

Just 25% say they'll spend more - 4-pts worse than previously. But even more ominously, the decline in spending growth is occurring across all income levels - including "super spenders" who earn more than $150,000 per year.

We asked respondents who are spending less to tell us why. Topping the list, two-in-five (40%) pointed to Inflation - 4-pts higher than in our January 2008 survey and a full 10-pt jump from only three months ago (November 2007).

In another clear sign of consumer unease, nearly three-in-ten (28%) of those spending less say it's to save more money - up 3-pts since January.

On a brighter note, the survey results point to two winning retail stores over the next 90 days - Costco (COST; Net Score = +8) and Wal-Mart (WMT; +2).

On the downside, Bed, Bath & Beyond (BBBY; -10), Macy's (M; -8), Sears (SHLD; -8), JC Penney (JCP; -7), K-Mart (SHLD; -6), The Gap (GPS; -6), and Nordstrom (JWN; -5) are showing considerable weakness going forward.

Consumer Electronics Spending Gets Whacked

In one of the big surprises of the survey, consumer electronics spending appears set to take a huge hit going forward. The declines in this sector were greater than those of any other spending category.

Only 19% say they'll spend more on consumer electronics over the next 90 days compared to 33% who say less. All told, that's a net 10-pt decline since January and the weakest outlook for electronics spending ever recorded in an Alliance survey.

Impact of Economic Stimulus Package to be Far Different Than Originally Intended

Perhaps the most striking finding came when we asked those who expect to receive the special tax rebate this spring to tell us how they'll most likely use the money.

The results may come as a shock to analysts who believe the government's economic stimulus package - which features a one-time tax rebate check of $1,200 per family - will jumpstart the U.S. economy.

Rather than stimulate spending, the survey suggests that a strong majority of consumers are most likely to use the special rebate to either pay down debt (33%), invest the money (23%) or save the money (21%).

By comparison, only a relatively small percentage say they'll actually spend the money on consumer goods - which is the stated intent of this one-time shot to the nation's economic arm.

These survey findings dispute the notion that consumers will race out to spend their rebate checks and thereby stimulate the economy. Rather, the findings present a picture of an uneasy American public that appears more predisposed to hunkering down to wait out the current period of economic uncertainty.

Related ChangeWave Articles:
-- Inflation's a Huge Drag as Energy Costs Transform Consumer Behavior (8/19/08)
-- Consumers Spending More Time in The Kitchen (8/12/08)
-- Yet Another Spending Downtick in ChangeWave Consumer Survey (7/22/08)
-- No Mas! Costco and Wal-Mart Lead a Consumer Revolution (5/27/08)
-- World Takeover By Wal-Mart and Costco (5/5/08)
-- U.S. Inflation Worries Spiral as Spending Falls...(4/14/08)