By: Brian Scott, SVP, Chief Growth Officer, PSCU
The economy continues to show signs of recovery in the past month as travel and in-person event attendance have increased following the CDC’s updated guidance for fully vaccinated individuals. Consumer comfort levels, among several other economic factors, are driving a return to pre-pandemic levels as we explore in our June 2021 edition of the PSCU Payments Index. In this month’s edition, we also present a deep dive into the Entertainment sector – one of the most negatively affected by the pandemic. Here are several key takeaways from the June 2021 PSCU Payments Index:
- While May CPI-U jumped to an annual rate of 5.0%, its largest increase since 2008, the Federal Reserve is now expecting to raise interest rates during 2023 (versus after 2023). The Fed’s 2021 inflation forecast has also increased by a whole percentage point to 3.4%.
The Consumer Price Index had its highest growth since 2008, rising 5.0% year over year in May. Americans fueled this growth with extra money in savings and decreasing debt balances, but increased consumer demand has strained supply chains already struggling with disruptions. The mismatch of demand and supply is creating the risk of shortages and inflation, and the Federal Reserve is expecting to raise interest rates in 2023.
- Growth in card payments remains strong, with the Entertainment sector (this month’s Deep Dive) returning close to 2019 levels.
Consumer spending continued to increase in May, with a large uptick in the Entertainment sector – one of the hardest hit during the pandemic. Americans’ comfort levels with in-person interactions, due in part to the CDC’s lifting of many restrictions across the country, has helped to fuel the growth in this sector, which is comprised of Destination events (including sporting events and concerts), Recreation, Movies and (Private) Clubs.
- With COVID-related restrictions easing, in-person attendance at major sporting events, amusement parks and other events is on the rise, signaling efforts to return to pre-pandemic levels.
At the start of June, President Biden called for a month of action to increase the number of vaccinated Americans by July 4, as the goal of the White House is to have 70% of the U.S. population vaccinated by this date. As more people are fully inoculated, COVID-related restrictions are being lifted across the country. Americans, desperate to pursue entertainment activities after the limitations of lockdowns, are attending more in-person events and locations in an attempt to return to normalcy. Compared to 2019 data, Entertainment sector purchases were up 22% for debit and 2% for credit.
- As consumer comfort levels with in-store purchases increase, Card Present volume continues to improve – but still significantly trails Card Not Present growth.
While Card Not Present (CNP) spending is still in the lead, representing 52% of overall credit purchases, Card Present (CP) purchases are seeing an increase – CP debit transactions in May are up by 27% compared to 2020. May also saw an increase of 61% in CP credit transactions, which have returned to 2019 levels.
- Credit card account balances posted a modest improvement in May.
As a result of pent-up demand, changes in consumer behavior in the post-pandemic months created a small increase in credit card portfolio balances in May 2021. Discretionary purchases are on the rise as the U.S. emerges from long-implemented COVID-related restrictions.
- Gasoline purchases are up, compared to 2019 levels, fueled by both higher prices at the pump and increased demand as crude oil hit $70 per barrel for the first time in three years.
Gasoline shortages occurred from the mid-Atlantic to the Gulf Coast during the cyberattack on the Colonial Pipeline in early May. The attack shut down the flow of refined oil in the region for six days. As a result, many Americans panicked over the potential disruption in gasoline availability, and many gas stations from Pennsylvania to Florida saw long lines and empty pumps. The shortages caused a spike in the price of gasoline – the average price per gallon in the U.S. is $3.08, up 4% in May.
Amazon’s Prime Days event is scheduled for June 21-22, and we will monitor the impact from the event on consumer spending, as well as purchases from Walmart and Target, which are launching similar events around the same time in June. Trends associated with these events, as well as the impact of the end of pandemic-related federal unemployment benefits, will be reported in the July 2021 edition of the PSCU Payments Index.
Brian Scott, SVP, Chief Growth Officer at PSCU, oversees a large and diverse group of our most critical client-facing teams. He partners with industry leaders in payments and community credit unions to create competitive payments programs. Scott joined PSCU in December 2015 as SVP of Vendor Alliances with more than 22 years of experience serving credit unions.