Are Consumers More or Less Optimistic?

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Consumer spending has long been the backbone of the economy, but confidence has been tested recently during this period of high inflation.

However, a new survey from e-commerce company Digital River reveals that while consumers are concerned about the current state of the economy, they are hopeful that conditions will soon improve.

Personal finances have deteriorated

The survey, which polled 3,000 consumers in the U.S., U.K. and Germany, found that 55% are concerned about their finances and the economy. Concern was higher in the U.S. (58%), followed by the U.K. (57%) and Germany (50%).

Further, only 17% overall said they were financially comfortable, while 49% said they were “getting by.” Another 31% stated that they were struggling.

The numbers are significantly worse than those from the same poll in 2022, according to Digital River. In 2024 in the U.S., only 19% are financially comfortable, compared to 39% in 2022. Additionally, 33% say they are struggling now, compared to only 25% in 2022. Further, 43% are getting by in 2024, compared to 34% in 2022.

In the U.K. and Germany, the spread is even bigger. In this year’s survey, 17% in the U.K. said they were financially comfortable compared to 47% in 2022, while 31% said they were struggling, compared to 17% in 2022. Fifty percent said they were getting by, compared to 35% in 2022.

In Germany, only 15% are comfortable, compared to 55% in 2022. Some 29% are struggling now, versus 17% in 2022, while 54% now say they are getting by, compared to 27% in 2022.

Higher costs mean less saving

The greatest concern among respondents is that their discretionary budgets are shrinking due to rising costs, which has hampered their ability to save. In the past six months, respondents said spending on food and groceries has increased the most, followed by utilities and housing/rent.

As a result, more consumers are spending less on discretionary items. Roughly half of consumers cited economic and geopolitical unrest as reasons for reducing spending. In the U.S., 50% are spending less, while only 18% are spending more. In the U.K., 53% are spending less and 15% are spending more, while in Germany, 50% are spending less and 15% are spending more.

The rising costs have made it more difficult for consumers to save money. The survey found that in the U.S., just 28% were saving more, compared to 32% who were saving less. About one-third reported no changes in their savings habits. In the U.K., 24% were saving more, while 25% were saving less and 37% reported no changes to their savings habits.

The numbers were slightly better in Germany, where 37% were saving more, 23% were saving less, and 36% reported no changes.

Hope on the horizon

While anxiety about personal finances is elevated right now, the survey found that consumers are more optimistic about their situation over the next 12 months than they were in 2022.

Overall, 40% expect their financial situations to improve in the next year, while 25% said it will get worse. In the U.S., optimism was the highest, as 43% expected things to get better, compared to 38% in 2022, while 24% said things would get worse, compared to 27% two years ago.

In the U.K., 40% expected improvements, compared to 18% in 2022, while 22% said things would get worse, versus 48% in 2022. In Germany, 37% were optimistic, compared to 25% in 2022, while 28% were pessimistic, compared to 41% in 2022.

This survey shows that consumers are hopeful that the worst is over and expect better days ahead, which should also be good for the markets and investors. Of course, it all depends on inflation dropping, interest rates going down, and the economy growing. However, while there has been some positive momentum, things remain uncertain.