February spending trends: Opportunities to revive and engage
CO-OP Solutions Payments Trends Report (Spending Data from February 1-28)
RANCHO CUCAMONGA, CA (March 15, 2023) — Uneasiness about the current economy continued as most spending categories were off significantly from not only the holiday shopping season, but January’s more modest results as well.
It seems that consumers are still waiting for the other shoe to drop, as strong underlying economic reports belie the widespread belief that a recession is just around the corner.
The early returns on February’s jobs data is encouraging, with ADP showing 242,000 private payroll jobs added, a strong increase over January’s 106,000 growth figure. February CPI index data is not expected to be released until mid-March, but inflation held steady in January at a rate of 6.4% over the last 12 months.
All major stock market indexes tumbled by more than 1% in the wake of Fed Chairman Jerome Powell’s recent comments, in which he fretted over stubborn inflation and the still-hot economy, indicating the Fed would consider more aggressive rate hikes this year if needed. Market watchers are predicting the Fed will raise interest rates by another 50 basis points at its next meeting on March 22.
Overall, Co-op spending data reports that February 2023 transaction volume was higher across both the debit and credit portfolios versus February 2022.
Co-op’s SmartGrowth consultants are closely watching the following key spending trends this month:
- Back to basics:Co-op’s February month-over-month data shows that consumers are tightening their wallets and hunting for bargains. While higher-end retail categories like Department Stores and Specialty Retail – which includes items like florists, antiques, and jewelry – fell by double digits in February, Discount Stores and Wholesale Grocery declined much more modestly (3-4%).
Moreover, Home Improvement, a high-flier during the pandemic, fell again in February after a precipitous drop in January. This continued downward trend coincides with the period when consumers typically begin to think about investing in home renovations and “sprucing up” in early spring.
Co-op’s data is backed up by national trends, as both Walmart and Home Depot recently warned of profit pressures as high inflation motivates consumers to focus on everyday needs like groceries at the expense of luxuries like home improvement goods. Meanwhile, popular discounter T.J. Maxx has seen a 5% increase in sales as economic uncertainty drives shoppers to the bargain bin for clothing.
- Amazon volume slides:The biggest month over month declines in Co-op’s February portfolio data were seen in the Amazon/Bookstores category, which fell by -41.7% in debit and -23.9% in credit, off of similar large declines in January.
“Despite the recent month-over-month softness in transaction volume, year-over-year Amazon is still up over 15%,” said Beth Phillips, Director, Co-op Solutions. “There is this narrative that consumers are waiting for a recession that hasn’t yet arrived, so they are naturally being more cautious with their spending. As consumers focus more on their immediate needs, they are taking a break from their online shopping habits.”
- Credit balances slip slightly:Following a year of steadily growing credit portfolio balances, Co-op data showed a modest drop of -0.29% in February 2023, following a -1.53% drop in January. Despite this, credit balances as of February 28, 2023, were still up by 14.42% over February 2022.
According to data from the New York Fed, credit card balances reached $986 billion in the fourth quarter of 2022, a record high. In addition, the percentage of credit card users making payments 30 days late rose to 5.9%, from 5.2% in the prior quarter.
“The fact is, consumers – and particularly younger consumers – are feeling increasingly stressed financially,” said John Patton, Co-op Senior Payments Advisor. “Despite a resilient job market, the pressure of high rates, inflation and the depletion of pandemic-era stimulus funds have left families’ cash reserves at their lowest level in years.“
Year-Over-Year Category Level Spending (Comparing February 2022 to February 2023)
About Co-op Solutions
Co-op Solutions is a credit union-owned financial technology platform built using an industry-leading ecosystem, and whose mission is to connect credit unions to the technology, strategic partnership and scale they need to best serve their members and grow now and into the future. Co-op Solutions partners with credit unions to unlock their potential so they can compete; does the hard work of innovation, creating a one-stop opportunity to help credit unions grow; and offers knowledge and expertise in a world where everything must be integrated. Founded in 1981, Co-op Solutions services 2,650 credit union clients, processes eight billion transactions annually, and manages a nationwide ATM network of more than 30,000 and a 5,700-location shared branch network. For more information, visit www.coop.org.
