By: Cindy McGinness, Vice President, Digital Experience, PSCU
In this month’s edition of the PSCU Payments Index, we focus on the latest consumer spending trends, including the Delta variant and its potential impact on the U.S. economy. Just as the country was beginning to emerge from COVID-19 this summer, the surge of the Delta variant has turned back the clock on the pandemic. Yet as consumers have grown more accustomed to change over the past 18 months, the economy continues to demonstrate its resilience. While the mix of spend has shifted, overall consumer spending continues to recover and adapt. The index looks at the impact of these forces and takes a deep dive into the Restaurant sector.
A sampling of key takeaways from the August report includes:
July CPI-U remained at a 13-year high of 5.4% annually.
Increasing housing costs – including rising rent and home prices – collectively pose a substantial threat to inflation and are being closely watched by both the Fed and the White House. On a positive note, while the annual July CPI-U remained the same from June, the July impact to the annual metric was the smallest in the past 15 months, posting at 0.5%.
While no dramatic fluctuations in consumer behavior were seen for the second straight month, consumers remained resilient with strong spending.
At the same time, the impact of the Delta variant, coupled with other economic influences like the stopping and re-starting of government assistance programs, are intersecting to create underlying uncertainty for consumers that will eventually influence consumer behavior.
Restaurants saw purchases up 28% for debit and 26% for credit compared to July 2019. Within the Restaurant sector, the rebound to in-person dining is being met with mixed sentiment, with a much more pronounced return to restaurants among younger generations.
For July, the Gen Z population (ages 18-22) had the biggest increase in spending compared to 2019, with debit purchases up 66% and credit purchases up 72%. Baby Boomers and above (ages 55 and up) showed modest growth, with debit purchases up 5% and credit purchases up 9% compared to 2019.
Credit card portfolio balances (for our same-store population) in July 2021 held steady, with a 0.2% increase. These balances are down 13% compared to the pre-pandemic July 2019 timeframe, an improvement of 1 percentage point compared to June.
The record-setting pace at which consumers are paying off credit card debt, along with average debt per household down 13.5% in Q1 2021 as compared to Q1 2020 (according to a WalletHub study), continue to contribute to lower credit card balances overall.
Card Present volume remains steady from June to July for both credit and debit while still trailing Card Not Present growth.
July 2021 Card Not Present (CNP) debit purchases represented 41% of all purchases, up seven percentage points from July 2019. CNP credit purchases represented 49% of overall credit purchases in July 2021, an increase of three percentage points from June 2019. We continue to see year-over-year growth in Card Present (CP) activity, with CP debit transactions for July 2021 up 11% compared to 2020 and up 2% compared to 2019. CP credit transactions rose by 31% for June 2021 compared to June 2020, and increased by 3% compared to June 2019.
As the Delta variant continues to spread, the FDA’s expected full approval of the vaccine – as well as the approval of booster shots for the immunocompromised, the expansion of clinical trials for children (ages 5-11) and policies from the U.S. military and larger companies like United Airlines and Amtrak requiring employee vaccinations – could boost confidence among the unvaccinated.
At the same time, many schools are re-opening for the fall, with most offering in-person classes. Although school masking requirements and choices vary from state to state, these decisions will influence one of the biggest summertime shopping events: back-to-school sales. With some states having tax-free back-to-school shopping periods, we will take a closer look at those merchant categories that will be impacted, as well as the cumulative impact on consumer spending patterns given changing policies and vaccination requirements.
Cindy McGinness directs PSCU’s initiatives to empower the company’s Owner credit unions with innovative and engaging digital solutions. Cindy leads an experienced team dedicated to delivering PSCU’s B2B and B2C solutions in the mobile and online channels, in addition to online bill payment services.