Consumer Spending Still Improving, but Challenges Await

Consumers spent more on their cards in the week ending Sept. 13 than they did a year earlier with gains for restaurants and consumer goods, especially electronics, sporting goods, home furnishings and automotive, according to a PSCU report released Monday.

The St. Petersburg, Fla.-based payments CUSO’s Transaction Trends Update showed debit card spending for Week 37 was 16.4% greater than the year-ago week, and the weekly gain was in line with the four-week average gain of 16.9%. Transactions were up 2.8% and have been positive for 11 consecutive weeks.

Credit card spend was up just 0.9%, which is lower than the four-week average gain of 2.3%. Transactions were down 4.1%, also below the four-week average decline of 3%.

“We saw good volume overall in Week 37, albeit with an expected decline from last week’s Labor Day holiday uptick,” Glynn Frechette, SVP for Advisors Plus at PSCU, said. “Consumers continue to show resilience, especially now that we are just over six weeks past the end of primary government support, and unemployment and layoffs remain elevated.”

But consumers are entering a challenging period, according to a report released by CO-OP Financial Services, a payments CUSO based in Rancho Cucamonga, Calif., about 37 miles east of Los Angeles.

With the disappearance of $600-a-week federal unemployment benefits at the end of July, “struggling consumers are already facing the prospect of having less cash on hand available,” the CO-OP report said.

“With the immediate prospects of a new government stimulus package unlikely, credit unions can expect a segment of their members to suffer from reduced or lost wages,” the report said. “This will lead them to begin shifting away from debit and toward credit, as they are forced to draw on credit lines to cover regular monthly bills and essential expenses.”

The PSCU report revealed the Midwest showed the greatest strength in the second week of September, while the weakest results came from the West.

The Great Lakes had a 3.2% gain for credit cards and 18.9 gain for debit cards. The Plains had a 5.1% gain for credit cards and 19.7% gain for debit.

Credit card spending fell 4.7% in the Rocky Mountain states and 11.8% in Hawaii. The smallest debit card gains were Hawaii (+3.1%) and the Far West (+7.9%).

CO-OP’s report released Sept. 15 showed online retailers continued to draw heavy volumes of consumer spending in August. Online bookstores (a category that includes Amazon purchases) showed spending increases of 50% for credit and 19% for debit.

Other leading merchant categories included hardware stores, grocery stores and discount stores, while travel and entertainment continued to lag.

Airline spending was down 74% by credit card and 64% by debit card from August 2019. Spending on car rentals was down 47% by credit and 3% by debit.

And consumers were still avoiding movie theaters: “Despite a gradual reopening and the long-awaited release of a handful of summer blockbusters, movie theaters continued their streak of historically low transaction volume, suffering a 93% drop in both credit and debit year-over-year,” CO-OP said.

However, travel spending was bullish among those planning to travel by snowmobile. “In fact, recreation-related purchases have enjoyed strong growth throughout the summer, perhaps reflecting the public’s desire to get outdoors and escape pandemic-related cabin fever.”