December spending trends: Resilient consumer spending closes out a busy year
PSCU/Co-op solutions smartgrowth team payments trends report (spending data from December 1-31)
ST. PETERSBURG, FL (January 18, 2024) — A steady economy and brighter outlook for 2024 helped boost consumer spending during the holiday season.
The inflation rate rose 0.3% in December, higher than consensus estimates, pushing the 12-month CPI to 3.4% at year end.
December job gains beat expectations with an increase of 216,000 payrolls, keeping the unemployment rate steady at 3.7%. The healthcare and social assistance, public service, and leisure and hospitality sectors led the way in job growth.
With inflation easing in November and job gains on a steady track, the Federal Open Market Committee (FOMC) refrained from raising its benchmark lending rate at its December 13 meeting. Most Fed watchers expect the agency to begin cutting rates in the second half of 2024.
This “Goldilocks” economic scenario is driving a surge in consumer confidence. The Conference Board’s Consumer Confidence Index jumped in December to 110.7, up from a downwardly revised 101.0 in November. According to the Conference Board’s chief economist Dana Peterson, “December’s increase in consumer confidence reflected more positive ratings of current business conditions and job availability, as well as less pessimistic views of business, labor market, and personal income prospects over the next six months.”
Overall, Co-op credit union portfolio data shows that December transaction volume rose by 5.2% in Credit and 1.9% in Debit on a rolling 12-month basis, while month over month volumes were up by 4.8% and 7.2%, respectively.
The Co-op SmartGrowth Team members are closely watching the following key spending trends this month:
- BNPL and online sales provide holiday shopping boost:Retailers saw mixed results this holiday shopping season, as U.S. consumers shifted much of their gift purchasing habits online.
eCommerce and buy now pay later (BNPL) were the primary catalysts of 2023’s holiday shopping season. U.S. shoppers spent $16.6 billion using BNPL in November and December, a 14% increase in volume over 2023. Meanwhile, according to Mastercard, online sales were up 6.3% over the 2022 holiday season, easily outpacing in-store sales, which showed a 2.2% lift year over year. Taken on the whole, Mastercard forecasts 3.1% growth in retail sales year over year, reflecting flat growth after accounting for inflation.
Per analysis of Co-op’s client payment portfolios, December transaction volume within the Amazon/Bookstores merchant category was up by 29.5% in both Credit and Debit. On a rolling 12-month basis, the category was up 17.0% in Credit and 32.0% in Debit.
The Retail category also showed strong month over month results, posting gains of 12.7% in Credit and 17.8% in Debit, as to be expected during the busiest shopping period of the year. However, the category has showed flat growth over the past 12 months, with an increase of 2.1% in Credit, and slight decline in Debit at -0.8%.
“There’s been a major shift in shopping behavior over the past four years,” says Ryan Prentice, Director, SmartGrowth Consulting Services, PSCU/Co-op Solutions. “Consumers have grown comfortable purchasing a wide variety of merchandise – from clothing and shoes to gifts and electronics – online. For many, this has become their go-to preference due to the added convenience.”
- Travel spending levels off:After a big drop in November, spending volume within the Travel merchant category leveled off in December, posting a decline of -2.1% month over month in Credit, and a modest gain of 1.2% in Debit.Despite this recent softening, the category remains elevated over the prior year on a rolling 12-month basis at 14.8% in Credit and 7.8% in Debit.
“Typically, travel is up in November and December as people prioritize visits with family during the holidays,” said John Patton, Senior Payments Advisor, PSCU/Co-op Solutions. “But this year, with a recent uptick in Covid cases and seasonal ailments, more consumers are choosing to stay close to home out of an abundance of caution.”
- Movies show resurgence:With crowd-pleasing films like “Barbie,” “Oppenheimer,” and “The Super Mario Brothers Movie” drawing the public back to the theater, Hollywood enjoyed its best box office returns since before the pandemic, as U.S. box office figureshit $9 billion for the first time since 2019.
According to Co-op client portfolio data, the Movie Theaters merchant category was up by 12.4% in Credit and 8.7% in Debit on a rolling 12-month basis. In December, the category showed transaction volume lifts of 13.6% in Credit and 17.8% in Debit over the prior month as consumers sought escape from the holiday hustle and bustle with popular draws like Taylor Swift’s “The Eras Tour.”
2023 Yearly Recap: Credit Balances, Delinquencies Rise
Looking back at 2023, economic highlights included the continuation of inflationary pressures that first arose in mid-2021 and the Fed’s ongoing rate hikes, both of which impacted consumers’ ability to purchase big-ticket items like cars, homes and major appliances. These trends, coupled with the depletion of pandemic-era stimulus savings, led to a shift toward higher credit card use.
Unfortunately, this increased credit usage has led to higher balances (up 14.85% in 2023 compared to 9.96% in 2022), and a growing debt burden for consumers, and delinquencies have begun to rise as a result.
“Whereas traditionally consumers reserve Credit for major purchases, we’re beginning to see households shifting more of their daily transactions toward Credit as a way to conserve their cash,” said Prentice. “As we move into 2024, credit unions concerned with rising Credit balances and delinquencies should seek to incent more Debit usage through spend and get campaigns. It’s also a nice companion to deposit growth initiatives.”
Year-Over-Year Category Level Spending (Rolling Year Average, and Comparing December 2022 to December 2023)
| Category |
|
(Jan’22 – Dec’22) vs (Jan’23 – Dec’23) |
|
Dec’22 vs Dec’23 |
|
(Jan’22 – Dec’22) vs (Jan’23 – Dec’23) |
|
Dec’22 vs Dec’23 |
|
| Agricultural |
|
-4.3% |
|
-8.5% |
|
-0.8% |
|
-17.1% |
|
| Amazon/Bookstores |
|
17.0% |
|
-3.3% |
|
32.0% |
|
-4.4% |
|
| Auto |
|
2.7% |
|
4.5% |
|
-0.6% |
|
3.0% |
|
| Electric Vehicle Charging |
|
95.1% |
|
84.5% |
|
115.2% |
|
115.1% |
|
| Campers & Camping |
|
-9.5% |
|
-16.7% |
|
-13.0% |
|
-16.3% |
|
| Computers |
|
-6.3% |
|
15.8% |
|
-11.8% |
|
-9.0% |
|
| Digital Goods |
|
22.5% |
|
31.7% |
|
18.4% |
|
29.1% |
|
| Books, movies, music |
|
-51.4% |
|
-52.1% |
|
-51.7% |
|
-53.1% |
|
| Dining & Entertainment |
|
5.9% |
|
8.9% |
|
3.0% |
|
5.9% |
|
| Movie Theaters |
|
12.4% |
|
12.6% |
|
8.7% |
|
13.1% |
|
| Education |
|
8.6% |
|
5.1% |
|
10.2% |
|
4.5% |
|
| Financial Services |
|
15.0% |
|
17.9% |
|
4.0% |
|
4.6% |
|
| Professional Services |
|
100.2% |
|
162.6% |
|
165.5% |
|
191.5% |
|
| Rewards/Cashback |
|
0.0% |
|
0.0% |
|
187.6% |
|
-66.6% |
|
| Rewards/Rebates |
|
0.0% |
|
0.0% |
|
-36.0% |
|
-26.4% |
|
| Furniture |
|
-11.9% |
|
-10.3% |
|
-15.0% |
|
-14.6% |
|
| Gas |
|
1.5% |
|
2.4% |
|
-1.6% |
|
0.3% |
|
| Grocery |
|
6.3% |
|
6.8% |
|
1.7% |
|
4.0% |
|
| Home Improvement |
|
-2.0% |
|
-0.7% |
|
-5.3% |
|
-3.1% |
|
| Medical |
|
2.2% |
|
4.1% |
|
-1.6% |
|
-3.0% |
|
| Office |
|
-1.5% |
|
6.5% |
|
-4.1% |
|
0.6% |
|
| Organizations |
|
2.0% |
|
9.6% |
|
0.3% |
|
4.3% |
|
| Other |
|
6.5% |
|
5.8% |
|
2.4% |
|
-1.5% |
|
| Political |
|
-37.1% |
|
48.8% |
|
-36.4% |
|
51.3% |
|
| Other |
|
6.2% |
|
8.5% |
|
14.4% |
|
19.0% |
|
| Pet |
|
0.1% |
|
-0.1% |
|
-2.9% |
|
-3.1% |
|
| Professional Services |
|
3.1% |
|
5.5% |
|
3.5% |
|
6.7% |
|
| Accounting |
|
-0.9% |
|
-0.7% |
|
45.4% |
|
68.7% |
|
| Employment Agencies |
|
34.5% |
|
-19.4% |
|
13.8% |
|
-16.8% |
|
| Retail |
|
2.1% |
|
3.4% |
|
-0.8% |
|
2.4% |
|
| Specialty Retail |
|
-4.9% |
|
-0.2% |
|
-8.2% |
|
-4.2% |
|
| Sport/Recreation |
|
2.0% |
|
1.5% |
|
0.5% |
|
-0.4% |
|
| Travel |
|
14.8% |
|
13.4% |
|
7.8% |
|
9.7% |
|
| Utilities |
|
4.2% |
|
4.4% |
|
1.0% |
|
3.2% |
|
| Grand Total |
|
5.2% |
|
6.8% |
|
1.9% |
|
3.6% |
|
What Credit Unions Should Do Now
Holiday overindulgence has left many members’ Credit balances overstuffed, so January is a great time to introduce low-rate balance transfer offers and debt consolidation loans. This approach delivers a triple bottom line impact, by spurring Credit portfolio growth and attracting new members (and their deposits), all while supporting members’ financial wellness needs.
Credit union Debit portfolios should also be at the forefront. With members increasingly worried about ballooning debt, institutions can show them how easy it is to use Debit as a practical budgeting tool for everyday purchases.
More information on the Co-op SmartGrowth Team can be found here.
About PSCU
PSCU/Co-op Solutions is the nation’s premier payments credit union service organization (CUSO) and an integrated financial technology solutions provider. With over four decades of industry experience and a commitment to service excellence and innovation, the company serves more than 4,000 financial institutions throughout North America. PSCU/Co-op Solutions leverages its expertise and resources on behalf of credit unions and their members, offering an end-to-end product portfolio that includes payment processing, fraud and risk management, data and analytics, digital banking, instant payments, strategic consulting, collections, ATM and POS networks, shared branching and 24/7/365 member support via its contact centers. For more information, visit pscu.com and coop.org.
