By: Yvonne Stelpflug, SVP, Advisors Plus at PSCU
In this month’s edition of the PSCU Payments Index, we present the first in a three-part Deep Dive into Holiday Spending as we monitor ongoing trends throughout the 2021 holiday shopping season. With Black Friday-style deals from major retailers showing up in early October, consumers are reacting to news of supply chain concerns and expected longer shipping times this holiday season by shopping early.
At the same time, COVID-19 cases are rising again in many states, even as the population of vaccinated Americans continues to expand and Pfizer has received Emergency Use Authorization for its COVID-19 vaccine for children between the ages of 5 and 11. In a hopeful sign, the U.S. ended its international travel ban on Nov. 8, which allows visitors to fly into the country with proof of full vaccination (although some exemptions apply). However, uncertainty remains as businesses await related legal implications of President Biden’s vaccine mandate for companies with more than 100 employees.
Key takeaways from our November report include:
- Consumer spending remained strong for both credit and debit purchases. The Consumer Confidence Index increased in October, reversing a three-month downward trend. In October 2021, credit card purchases were up 31% and debit purchases were up 35% compared to October 2019.
- Two positive indicators over the last month were centered around credit card usage. October marked the first month of 2021 in which all sectors reported growth above 2019 levels for credit card purchases, while the overall credit card delinquency rate has remained 61 basis points lower than 2019 results for two months, finishing at 1.32%.
- Inflation increased again as the CPI-U for October rose to 6.2% year over year, now a 31-year high. The 0.9% increase over September included notable increases in energy costs. Continued inflationary pressures could prompt the Fed to raise interest rates in 2022.
- Workers remain in short supply as many retailers are paying premiums for seasonal holiday staff. The unemployment rate fell to 4.6% in October as 531,000 jobs were added during the month. At the same time, the number of jobs created in August/September was adjusted upwards by 235,000 in total by the Bureau of Labor Statistics (BLS). The U.S. has had more than 10 million open jobs since June, and the Department of Labor reported new claims for unemployment benefits dropped by 14,000, finishing at 269,000 for the week ending Oct. 30.
- From our Holiday Spending Deep Dive, Goods sector purchases were strong, with credit up 13.6% and debit up 9.5%. Retailers are luring shoppers in early as they work to ensure Black Friday is not rife with supply chain issues and staff shortages, which could lead to inventory problems, higher prices and shipping delays. Within the Goods sector credit card purchases, Clothing stores led the pack, up 30.5% compared to 2020, followed by Discount stores (Target, Walmart, Ross, Home Goods, Dollar General), up 27.4% and Retail stores up 16.18%. Within the Goods sector debit card purchases, Discount stores were top of the list up 24.6% compared to 2020, followed by Clothing stores up 15.9% and Retail Stores up 9.3%.
As the new realities of a post-pandemic economy begin to materialize, the PSCU Payments Index continues to evolve accordingly. We are now focusing more on year-over-year changes and less on comparisons back to pre-pandemic 2019. We hope that these insights will help our financial institutions continue to make informed decisions.
The 2021 holiday shopping season will prove to be as unique as 2020. While the holiday season could be challenging for retailers and consumers, we do anticipate strong demand and a rise in overall spending. We will continue to closely monitor consumer trends and the impact on holiday spending over the next two months.
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.