Today, PSCU published the August 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.

In this month’s PSCU Payments Index, we see continued positive signs of reducing inflation, even with a marginal uptick in the CPI-U rate for July, along with improved consumer sentiment and ongoing resilience in purchasing growth for both credit and debit. This month’s Deep Dive highlights the annual Amazon Prime Day sales event, along with competing events from Target and Walmart. For these July events, generational differences are also highlighted in the results for each of these retailers.

In the Labor Department’s Aug. 10 update, the Consumer Price Index (CPI) increased by 0.2% in July. The annual rate of inflation increased from 3.0% through June to 3.2% through July. This is the first acceleration in 13 months and shows that core inflation (CPI less food and fuel prices) edged down in July from 4.8% to 4.7%. The largest contributor to inflation again is shelter, accounting for over 90% of the annual increase. Also of note, Americans’ credit card debt levels surpassed $1 trillion for the first time in history, according to data released on Aug. 8 by the Federal Reserve Bank of New York.

The Consumer Confidence Index notably improved in July to 117.0 (1985=100), up from 110.1 in June. This is the highest level since July 2021 and is representative of all age groups and income levels, including those earning below $50,000 and over $100,000 per year. In this month’s survey, consumers expressed the intent to spend less in coming months on discretionary items like travel, recreation and gambling. The Bureau of Labor Statistics (BLS) reported in its July 2023 jobs report that 187,000 jobs were added for the month, with increased jobs in health care, social assistance, financial activities and wholesale trade. The overall unemployment rate decreased slightly to 3.5%, or 5.8 million people for July. With inflation above the Fed target rate of 2% and continued low unemployment, the Fed increased interest rates an additional 25 basis points on July 26. The next Federal Open Market Committee (FOMC) meeting is scheduled for Sept. 19-20.

“Consumers continued to show resiliency in July, highlighted by steady purchase volumes and another successful Amazon Prime Day event. The success of the annual Prime Day event underscores the central role that Amazon plays in the lives of consumers and, given the growth we saw in this month’s performance, our credit unions have also been successful in having their cards in the wallets of their members,” said Tom Bennett, Manager, Advisors Plus Consulting at PSCU. “We’ll closely monitor the upcoming Amazon Prime Big Deal Days event in October, which has helped essentially add another month to the traditional holiday spending period over the past few years, especially against the backdrop of the inflationary environment.”

A sampling of key takeaways from the August report includes:

• Consumers remained resilient in July, with strong overall purchase volumes. Year-over-year growth in credit purchases was up 2.1%, while debit purchases grew 3.2%. Transaction growth continued to be stronger than growth in purchases, with credit and debit each up 4.7% in July.

• For credit and debit purchases, the largest contributor to growth in July was Restaurants, with Gasoline notably offsetting both credit and debit purchase growth. 

• The Consumer Price Index (CPI-U) increased for the first time in just over a year, rising from 3.0% to 3.2% in July. Shelter accounted for over 90% of the all-items inflationary increase. It is anticipated that the Fed could raise interest rates one more time in 2023 if sufficient inflationary cooling does not continue.

• Amazon held their annual Prime Day sale event on July 11-12. Purchase growth was up 9.0% for credit and 3.0% for debit for the 7-day period when the sale occurred. Walmart and Target each held competing sales during the same week in 2023 with differing results. Walmart posted growth in credit purchases of 4.5% and 7.4% in debit purchases, while purchase growth at Target was down 9.3% for credit and 5.1% for debit. Amazon also announced a “Prime Big Deal Days” sale for October 2023.

• The credit card delinquency rate increased again in July and finished at 2.08%, above the July 2019 pre-pandemic level by 29 basis points. Total credit card balances were up 12.6% for July compared to a year ago, while the average credit card balance for active accounts was $2,996, up 8.2% (or $227) year over year. Notably, Americans’ credit card debt levels have surpassed $1 trillion for the first time in history, according to data released earlier this month.

The full report is available for download here or can be shared as a PDF upon request.