Consumer confidence, bolstered by a positive outlook among young adults, surged to its highest level since November 2007 on Discover’s U.S. Spending Monitor.
The survey by the issuer of the Discover Card jumped 5.5 points to 91.5 (out of 100) in April. Overall, 34 percent, a new high, believe the U.S. economy is improving.

Discover Card’s small business index measuring economic outlook took a 9.2 point dive to 75.7 in March, with a surge in owners who say their businesses are deteriorating. More than half, or 53 percent, or respondents, said the economic climate will get worse in the next six months, compared to only 37 percent who answered that same in February.

Discover Financial Services sees a more positive outlook for 2010 with a stabilizing credit card delinquency rate, but it took a net loss of $104 million, or 22 cents a share, in the first quarter ended Feb. 28 – that includes a previously announced loan-loss reserve increase of $305 million. Its first quarter loss compares to a net income of $120 million for the first quarter of 2009. However, Discover card sales volume increased 5 percent from the prior year to $22 billion.

Although its credit delinquency rate may have leveled off, Discover Financial Services is boosting its reserves to cover loans deemed uncollectible by $305 million, and it expects to report a first-quarter loss of 22 cents to 23 cents per share. Discover said the rate of borrowers becoming 30-days delinquent is estimated to be about 5 percent, a reduction of 25 basis points from the fourth quarter 2009.

The U.S. Spending Monitor index from the issuer of Discover credit cards rose 2.3 points to 87.5 as the economic outlook from consumers improved, indicating an easing of spending cutbacks fostered by the prolonged recession. Nonetheless, Discover reported no improvement in the attitudes of consumers surveyed when it comes to personal finances.

On the day landmark credit card laws took effect and made headlines worldwide, American Express and Discover released statements seeking to educate customers with online guides on the reform. Most other major credit card issuers did not release statements on the most sweeping credit card legislation in years – the first to generally ban retroactive interest rate increases and restrict certain fees.

Despite lingering pessimism about the U.S. economy, consumers are feeling better about their personal finances, according to Discover’s U.S. Spending Monitor, a monthly glimpse into Americans’ financial outlook. In January, more consumers said their finances were in good shape or improving. Overall, 34 percent rated their personal finances as good or excellent – a 3-point increase from December and a 9-month high, Discover said.

More small business owners surveyed this month have increased expectations that conditions for them will improve in the next six months, according to Discover’s Small Business Watch. More business owners are planning to increase spending, with 25 percent saying they will spend more on advertising, inventories and capital expenditures. This figure is up from 18 percent in December. There was also a jump in this category in the December-November time frame.

Facing a pivotal year ahead with hopes of a turnaround despite looming reform laws, most credit card issuers saw declines in December delinquencies – or the 30-days late rate – but charge-offs are still troubling. Another challenging year ahead for the credit card industry includes the implementation of reform laws next month that are expected to hamper profitability with the toughest restrictions yet on when and how to impose interest rate hikes or penalty fees.