Is the Economy Entering Phase 2 of Recovery? New Data Shows Spending Is Up

As the economy crept back to life in early June, the CUSO CO-OP Financial Services was watching consumer payment transactions closely, and it found promising signs of resurgence.

Though debit and credit transactions between June 1 and 15 were down by 5% and 3% respectively, the average amount consumers spent had increased from this time last year, which could signal that the economy is entering phase two of its recovery. The total dollar amount of debit transactions rose by 10%, while credit transaction totals jumped 6%, compared with June 2019.

This followed a cautiously optimistic report from May, which found that the widespread easing of shutdowns and restrictions correlated with a modest rise in transactions.

But one month on, the COVID-19 pandemic means consumers are still being selective about how they shop.

Unsurprisingly, online shopping came out on top, according to CO-OP’s data. It found online bookstores such as Amazon have seen the most consumer spending throughout the pandemic, with debit spending up 26% and credit spending up 61% in June.

“Amazon continues to be a strong top-of-wallet opportunity for credit unions, particularly as the marketplace begins offering summer deals and discounts,” CO-OP said in a press release.

Home quarantine appears to have sparked more DIY projects, as hardware stores saw a 35% increase in debit spending and a 32% increase in credit spending — a continuation of a trend that’s lasted several weeks.

Consumers are also buying frozen food in bulk, likely aiming to avoid repeat trips to the store amid a health crisis, as debit spending at freezer and meat locker provisioners rose 18% and credit spending spiked 23%. This mirrors an announcement from food company Nielsen that said it’s seen a 40% year-on-year increase in frozen food purchases over 11 weeks, according to CO-OP.

It’s a similar story for discount stores, which saw debit spending rose by 10% and credit by 20% during a 10th consecutive week of year-over-year growth.

But not all sectors are enjoying a spending renaissance.

Despite a slight recovery from last month, consumers still appear wary of supermarkets and grocery stores, according to CO-OP. It reported debit spending in that sector was 12% and credit spending 5% less than it was in June 2019, which could indicate a long-term shift toward online shopping.

Department stores have also suffered a drop in spending, seeing 10% less spending in debit and 3% less in credit transactions, according to CO-OP, which said recovery prospects for this sector aren’t looking good.

“Some are speculating that the decline may be permanent; one former department store executive predicted that one-third of American malls will close over the next decade,” CO-OP’s report said.

CO-OP’s analysis of COVID-19 transaction patterns and their effects on credit unions is ongoing.