Consumer worries about a possible recession next year are starting to show up in reports from payments CUSOs, dampening their outlook for holiday spending.
Co-op Solutions of Rancho Cucamonga, Calif., reported Wednesday that credit union members it serves increased their spending 4.3% by credit and 0.8% by debit from September to October.
That range bracketed with the U.S. Census Bureau’s report Wednesday of a 3.6% unadjusted gain for the month for all retail sales except automobiles and car parts. Census said the gain after seasonal adjustments was 1.4%.
PSCU, a payments CUSO based in St. Petersburg, Fla., reported Tuesday that affiliated members’ overall spending in October rose 10% by credit and rose 5% by debit from a year earlier, which also bracketed the Census’ report of an 8.6% 12-month gain for retail spending, excluding automobiles and parts.
Co-op’s report said it expects slower holiday growth this season. Although consumers are expected to purchase fewer gifts this year, shoppers will end up paying about the same amount as last year because of higher prices.
“Retailers are trying their hardest to extend the holiday season this year,” John Patton, Co-op’s senior payments advisor, said. “They kicked off very early sales to entice cautious shoppers onto the sales floor.”
Some of that spending will be coming from savings and borrowing, Patton said.
“Unfortunately, inflation is still an issue and many consumers may find themselves in difficult straits these coming months, especially over the winter as the costs of heating fuel costs are expected to rise significantly,” he said.
Inflation was running at an annual rate of 7.7% in October.
The PSCU Payments Index report found inflation continues to contribute to growth in purchases, outpacing growth in transactions. For October, growth in overall transactions was up 8% for credit and 3% for debit.
PSCU said there were signs of softening in spending in October, with October posting the lowest 12-month growth rate this year.
“Holiday spending appears to be off to a slow start, with fewer purchases in clothing and sporting goods showing shifts in consumer spending,” it said.
PSCU cited a survey by the New York-based consulting company Accenture that found two-thirds of U.S. shoppers said they plan to spend the same or less than last year. Among those planning to spend more, many said they would be forced to do so by inflation.
Casey Merolla, a managing director at Accenture, said retailers are responding by planning more promotions and discounts.
Despite those concerns, the Fed G-19 Consumer Credit Report released Nov. 7 showed both banks and credit unions continued this year’s strong gains in credit card balances at least through September.
Credit unions held $70.3 billion in credit card balances as of Sept. 30, up 14% from a year earlier — the biggest 12-month gain since September 2007. The gain from August to September was 0.7%, compared with an average September gain of 0.2% from 2015 to 2021.
Also, Walmart’s third quarter that ended Oct. 31 showed higher-than-expected sales, which company officials attributed Tuesday in part to inflation and in part to attracting a larger share of consumer spending.
Walmart CFO John David Rainey said its U.S. same-store sales accelerated by 8.2% from the second quarter to the third quarter, with increases in average ticket size, as well as transactions. Sales grew 10.3% at its U.S. Sam’s Clubs — their 11th consecutive quarter of double-digit same-store growth, excluding fuel and tobacco.
“As a total company, we’re seeing strength in stores, clubs and e-commerce,” CEO Doug McMillon said. “Customers that came to us less frequently in the past are now shopping with us more often, including higher-income customers.”