Gift boxes lined up

The PSCU Payments Index January 2022: Consumer Spending Strong through the Extended Holiday Shopping Season

By: Yvonne Stelpflug, SVP, Advisors Plus at PSCU

In this month’s edition of the PSCU Payments Index, we present the final installment in our three-part Deep Dive into 2021 Holiday Spending. Consumer spending in credit and debit purchases was strong throughout the three-month holiday season, with many resuming in-person shopping.

There is new uncertainty for potential economic impacts due to the rapid spread of the Omicron COVID-19 variant. On January 13, the U.S. Supreme Court blocked the vaccine-or-test mandate for large employers proposed by the Biden administration while allowing a vaccine mandate for certain healthcare workers to take effect. The CDC reported that nearly 74% of the U.S. adult population is fully vaccinated against COVID-19 with vaccine demand peaking in December. The convergence of these dynamic and rapidly evolving events continues to have implications on the physical, psychological and economic health of the overall population.

Key takeaways from our January report include:

  1. Credit card usage continues to rise. Consumer spending was very strong for both credit and debit purchases in December, with growth in credit continuing to outpace debit. In December 2021, credit purchases were up 23% and debit purchases were up 14% compared to December 2020. Transactions grew at a slower rate than purchases, providing a slight improvement to average purchase sizes.
  2. With the growth in credit card purchases, average credit card balances increased in December by 1.4% to $2,724. December 2021 results were 3% lower than 2020, closing the gap from the pay-downs over the past 18 months.
  3. Contactless tap-and-go transactions continue to gain traction. For December 2021, one in five Card Present (CP) transactions on contactless debit cards were tap-and-go. For credit contactless cards, this also hit a new high at 19%. As contactless transactions have continued to replace cash for smaller purchases, the average contactless purchase remains below the non-contactless card purchase.
  4. In Part III of our Deep Dive on 2021 Holiday Spending, growth in our same-store population of credit unions outpaced market predictions, with purchases in the Goods sector up 13.7% for credit and 8.8% for debit over the cumulative three-month holiday season. While retailers started holiday sales in early October, the strongest period for purchases remained Thanksgiving week through the week before Christmas. Notably, consumers resumed in-person holiday shopping, with Goods sector CP credit purchases up 21% and CP debit purchases up 9% compared to 2020. Card Not Present (CNP) credit purchases were up 7.6%. For the month of December, overall purchases in the Goods sector were up 12.8% for credit and up 7.1% for debit compared to 2020. Within the Goods sector for December, merchant categories (beyond the large retailers like Amazon, Target and Walmart) with some of the largest year-over-year increases in purchases include Jewelry Stores with an increase of 36% credit and 20% debit, followed by Clothing Stores, Sports Apparel Stores, Department Stores and lastly, Electronics Stores.
  5. The CPI-U for December increased to 7.0%, the largest yearly increase since June 1982. The ‘core’ PCE (Personal Consumption Expenditures) price index, which excludes food and energy prices due to their volatility, rose to 5.5% in December – the largest 12-month increase since February 1991. The Federal Reserve is wrapping up its large-scale bond repurchase program by spring and hinted that interest rate changes could come as early as March to curb the high inflation.
  6. The unemployment rate fell to its lowest point since the onset of the COVID-19 pandemic, registering at 3.9% in December with 199,000 jobs created. The estimated number of unemployed workers dropped by 483,000 to 6.3 million. These metrics have improved from the start of 2021 by 2.8 percentage points and 4.5 million workers respectively. The Department of Labor reported the four-week moving average for new claims for unemployment benefits increased by 4,750, finishing at 204,500 for the period ending January 1. Prior to the pandemic in February 2020, the unemployment rate was 3.5% with 5.7 million unemployed. Sourcing employees remains a top concern.

Looking Ahead

Almost two years into the COVID-19 pandemic, consumers are growing increasingly weary and yearn for a return to some sort of ‘normal’ and this sentiment is reflected in spending habits. As we progress into 2022, we will continue to evolve the PSCU Payments Index to deliver timely, relevant insights into consumer spending trends. Consumer preferences and behaviors continue to shift and evolve; accordingly, the Payments Index will include greater 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 as we journey through 2022.

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.