By: Yvonne Stelpflug, SVP, Advisors Plus at PSCU
In this month’s edition of the PSCU Payments Index, we present the second in a three-part Deep Dive into Holiday Spending as we monitor ongoing trends throughout the 2021 holiday shopping season. An uptick in both credit and debit purchases gained momentum, coinciding with the more traditional start of the holiday shopping period.
Black Friday sales were beginning as news of the COVID-19 Omicron variant was announced in late November. As the CDC continues to learn more about the rate of transmission and the protection by the current COVID-19 vaccines, concerns of increased re-infection rates and the variant’s impact on the recovering economy remain to be seen. COVID-19 cases are on the rise again in the U.S., while vaccine demand is also increasing.
Key takeaways from our December report include:
- Consumer spending remained strong for both credit and debit purchases, with growth in credit outpacing debit as we get further from the many government COVID-19 relief programs that ended in late summer. In November 2021, credit purchases were up 25% and debit purchases were up 18% compared to November 2020.
- As observed in Part II of our Holiday Spending Deep Dive, Goods sector purchases remained strong, with credit up 14.9% and debit up 10.5% for the month of November. This builds on the solid start to the holiday shopping season in October, in which credit was up 13.6% and debit was up 9.5%. Over the two-month holiday period thus far, consumers have notably resumed in-person shopping, with Goods sector Card Present (CP) credit purchases up 20% and debit purchases up 16% for the five days of Thanksgiving to Cyber Monday compared to 2020. Within the Goods sector credit card purchases, Department Stores led the pack, up 46% compared to 2020, followed by Clothing Stores, Sports Apparel Stores and Jewelry Stores. Cyber Monday credit purchases within the Goods sector were up 7.9% from 2020, while debit purchases were down by 9.9%.
- Fed Chief Jerome Powell is no longer using the term “transitory” to describe inflation, which could signal a change to tighten monetary policy – and that higher interest rates could be on the horizon. Inflation increased again, as the CPI-U for November rose to 6.8%, the largest yearly increase in 39 years. Inflationary impacts are expected to translate into a 5.9% increase in monthly Social Security payments in 2022, while the cost of living adjustment (COLA) for 2021 was 1.3%. With rising inflation, we expect to see higher purchases in Groceries year-over-year.
- The average amount of balance transfers has increased to $3,179 in November from the lowest point in August 2021, up 2.4%. The rate of usage among active accounts has returned to a pre-pandemic cycle and is expected to seasonally peak in the first quarter of each year, with March as the high point. With increases in the rate of usage and average transfer, financial institutions should prepare for the opportunity of the upcoming season increases in the new year.
- The overall credit card delinquency rate is now 53 basis points lower than 2019 results for November, finishing at 1.43%. Based on historic seasonality, we expect the overall delinquency rate to increase through the end of the year. It will be important to watch for the closing of the 60-basis-point gap in comparing 2019 monthly performance, especially with the sunset of forbearance accommodations.
- While the unemployment rate fell to 4.2% in November with 210,000 jobs added, this was much lower than the 550,000 jobs that were expected to be added. Sourcing employees and job creation continue to be a concern. New claims for unemployment benefits are at 238,750 for the period ending November 27, the lowest level since March 14, 2020 when it was 225,500.
The 2021 holiday shopping season continues to be unique. Strong consumer purchasing continued through the peak of the holiday shopping season, however, there were mixed results among the larger retailers amidst a shifting tone from the Fed on inflation. We will continue to monitor consumer trends and the impact on holiday spending over the next month.
As new uncertainties of COVID-19 variants and the longer-term impacts of inflation on the recovering economy materialize, the PSCU Payments Index continues to evolve, with more focus on year-over-year changes and fewer comparisons to pre-pandemic 2019. We hope that these insights will help our financial institutions continue to make informed decisions through this final quarter of 2021.
Yvonne Stelpflug has served as senior vice president, Advisors Plus at PSCU since September 2021. She joined PSCU in June 2019 as a managing vice president of Account Management and has more than two decades of financial services industry experience, working at credit union service organizations, card processors and financial institutions. With previous leadership roles in operations, product development and sales/account management, Yvonne also brings a wealth of expertise to grow and adapt to the changing payments environment and continue the forward momentum of Advisors Plus.