November 2023 Edition: A Deep Dive into Holiday Spending - Part I
Today, PSCU published the November edition of the PSCU Payments Index, the goal of which is to provide information and insights to help financial institutions navigate the evolving financial landscape to make informed, strategic decisions for their organizations and members.
As the holiday shopping season commences, year-over-year growth in consumer spending continues to soften with modest increases reported for both credit and debit throughout October. In the November edition of the PSCU Payments Index, we present the first installment in our annual three-part Deep Dive series on holiday spending, which has displayed lackluster results in the Goods sector and mixed results for large retailers thus far.
The Consumer Confidence Index declined for the third straight month in October to 102.6 (1985=100), down from an upwardly revised 104.3 in September. Consumers remain concerned with rising prices overall, especially groceries and gasoline, along with the current political climate and higher interest rates. In the October survey, the decline in confidence spanned all households ages 35 and older, as well as all income levels.
In the Labor Department’s Nov. 14 update, the Consumer Price Index (CPI) for October was flat from the prior month, but up 3.2% year over year. Both were below estimates, sparking a rally on Wall Street. Excluding the volatile energy and food sectors, core CPI increased 0.2% since the prior month and 4.1% year over year, marking the smallest annual increase since September 2021. On Nov. 1, the Federal Reserve voted unanimously to leave interest rates unchanged. With one remaining Federal Open Market Committee (FOMC) meeting in 2023 (Dec. 12-13), it appears unlikely there will be a rate increase given recent economic data. A recent WSJ survey of economists reported the likelihood of a recession in 2024 has softened to 48%, down from 54% in the July survey.
In the October 2023 jobs report, the Bureau of Labor Statistics (BLS) reported that 150,000 jobs were added for the month, a sharp decline from September. Health care, government and the social assistance sectors saw job growth while manufacturing declined due to strike activity. The October overall unemployment rate increased slightly to 3.9%, or 6.5 million people.
On Nov. 14, the House of Representatives voted in favor of new Speaker Mike Johnson’s two-step continuing resolution (CR) plan, hopefully avoiding a government shutdown. If passed by the Senate and signed by President Biden later this week as expected, the stopgap plan will extend funding for some government agencies through mid-January and others through early February. As substantial economic impacts are typical byproducts of government shutdowns, we will continue to monitor these developments closely.
“As the holiday shopping season kicks off, Consumers Credit Union has partnered with PSCU’s Advisors Plus team to launch a targeted bonus points and cash campaign to our cardholders,” said Tyler Lange, director of Payments at Consumers Credit Union. “Through a series of emails, including one on Black Friday and another a few days before Christmas, our objective is to encourage our members to choose their credit union card for all their holiday spending. By creating a broad pattern of usage during the holiday shopping season, we look to maintain that top-of-wallet position throughout the year. Additionally, we recently launched digital issuance to provide members instant access to their card credentials – allowing them to easily leverage their card and earn rewards during peak holiday spending.”
A sampling of key takeaways from the November report includes:
Consumer purchases softened in October and the rate of growth continued to diminish to the lowest point of 2023. Year-over-year growth in debit purchases was up 3.2%, while credit purchases were up 0.4%. Transaction growth finished with debit up 3.2% and credit up 2.1% for the month.
For credit and debit purchases in October, the largest contributor to growth was the Services sector once again. Goods was the category with the largest offset to credit purchase growth, contributing a 0.8% reduction. For debit purchases, only Gasoline negatively contributed to a year-over-year reduction of 0.4%.
The Consumer Price Index (CPI-U) was flat in October, while the 12-month rate of inflation was up 3.2%. Shelter costs rose 0.3% in October – half the gain in September – perhaps signaling a changing tide in this sector. Excluding the volatile Energy and Food sectors, the core CPI index increased 0.2% in October.
Growth in discretionary spending remained positive but softened in October, with debit purchases up 4.0% and credit purchases up 0.6%. Growth in non-discretionary (or mandatory) spending followed a similar softening trend, with debit purchases up 3.1% and credit purchases up 0.4%.
The holiday season kicked off with sales at the top retailers in early October. Amazon, Target and Walmart jockeyed to lure consumers to early holiday offerings with mixed results. For the month, growth in purchases for the overall Goods sector was down for credit by 2.1% and up for debit by 0.8%.
The credit card delinquency rate increased again in October and finished at 2.33%, above the October 2019 pre-pandemic level by 40 basis points. Total credit card balances were up 9.2% for October compared to a year ago. The average credit card balance for active accounts was $3,033 for October, up 7.3% (or $207) year over year.