By Paul Carton
December 11, 2008

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 (23%; up 2-pts) and Apple (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.

Consumer 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.