By: Norm Patrick, VP, Advisors Plus at PSCU
The way that consumers purchase food has evolved throughout the course of the pandemic, depending upon variables such as food availability, supply-chain issues and store/restaurant closings. In this month’s edition of the PSCU Payments Index, we present a Deep Dive into Food – the combined Grocery and Restaurant sectors – to gain better insight into the latest trends. While the total spend in Food purchases has grown, in part due to rising prices and continued bulk buying, the spend mix is falling back to more of a pre-pandemic pattern.
The evolving path of the pandemic remains evident. While the Omicron variant certainly affected economic activity in January, the COVID-19 infection rate has been declining in most states as the latest wave appears to have peaked, falling by more than half since mid-January. However, the Consumer Confidence Index decreased in January, impacted by challenges from rising prices and the ongoing pandemic, as well as the supply chain disruptions and market shortages that are expected to continue through 2022.
Key takeaways from our February report include:
- Consumer spending was again very strong for both credit and debit purchases in January, with growth in credit continuing to outpace debit. Overall credit purchases were up 23% and overall debit purchases were up 5%. Consumers eager to return to pre-pandemic habits posted strong spending growth in all sectors above 2021 levels. The Goods (12%) and Groceries (13%) sectors saw strong growth, while the Travel (106%) and Entertainment (99%) sectors reported the highest growth numbers. Year-over-year growth in debit purchases was softened by the record debit growth at this time last year, fueled by federal government stimulus disbursements in Dec. 2020 and Jan. 2021.
- The average credit card balance for January 2022 was $2,736 – marking the first time since the start of 2019 that the year-over-year average credit card balance has not dropped. Compared to January 2020, average credit card account balances were down 9.7%, or $294.
- Growth in Card Not Present (CNP) purchases within the Food sectors has accelerated compared to pre-pandemic annual results, with added growth when comparing 2021 to 2020 in the Restaurant categories. In comparing full-year 2021 to 2020, credit was up 25% in Other Dining and 29% in Fast Food, with debit up 27% and 26%, respectively. Consumer acceptance of online food purchases and in-person pickup or delivery has become more mainstream. Grocery stores and Other Dining saw growth in CNP credit and debit purchases of over 100% from full-year 2019 to 2020. For the same period, Fast Food CNP growth in purchases was still notable at 55% for credit and 73% for debit.
- The CPI-U for January increased to 7.5%, the highest point since February 1982. The pace of increase for January was the same as December’s increase of 0.6%. Food prices rose 7% with Restaurants, Fast Food and grocery stores and used-car prices rose 74%, all contributing to the increase. Interest rate hikes are expected to begin in March.
- Stronger-than-expected job growth was recorded for January, while the unemployment rate stayed relatively flat from December at 4%. The estimated number of unemployed workers is 65 million, up 200,000 for January. These metrics have improved from February 2021 by 2.4 percentage points and 3.7 million workers, respectively.
As consumer preferences and behaviors continue to shift and evolve, the Payments Index will now include a greater emphasis on our monthly Deep Dive, along with greater focus on year-over-year changes and fewer comparisons to pre-pandemic 2019. We hope that these relevant insights will help our financial institutions continue to make informed, strategic decisions in 2022.
Norm Patrick is vice president of Advisors Plus, established in 2004 as the consulting arm of PSCU. With nearly 25 years in the financial services industry, Norm founded the Debit & Checking practice area in 2007 based on his experience in managing one of the largest debit card portfolios in the U.S.