PSCU published the March edition of the PSCU Payments Index, the goal of which is to provide information and insights to help financial institutions make informed, strategic decisions on the road ahead.

Trends in consumer purchasing are beginning to show early signs that we are on a path of the soft landing the Fed has been working toward. In our February 2023 data, we find consumer purchasing, while still positive for credit and debit cards, in mid-single-digit growth.

In the Labor Department’s March 14 update, the Consumer Price Index (CPI) declined by 0.4% for the month of February, bringing the 12-month rate of inflation to 6.0%. The largest contributor, accounting for 70% of the increase, was shelter, with food, recreation, and household furnishings and operations also contributing. The Bureau of Labor Statistics (BLS) reported in its February 2023 jobs report that 311,000 jobs were added for the month, with leisure and hospitality, retail trade, government and health care jobs showing notable gains. The overall unemployment rate for February finished at 3.6% or 5.9 million people.

The Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures price index (PCE), increased in January to 5.4%. The Federal Reserve’s next meeting occurs on March 21-22, where a quarter-point rate increase was originally expected; however, some analysts are now predicting no rate increasefollowing the recent collapses of Silicon Valley Bank, Signature Bank and Silvergate Bank. While these recent banking collapses appear to have little impact on the credit union system, we will continue to monitor as the situation evolves.

The Consumer Confidence Index decreased in February to 102.9 (1985=100). The decrease in February reflected large drops in confidence for households aged 35 to 54 and households earning $35,000 or more. The Expectations Index fell further to 69.7, which is notable as the Conference Board has indicated that, when below 80, it would often signal a recession in the next year. The national average price per gallon of gasoline finished at $3.46 for the week ending Mar. 13, down 20% year over year.

In the March 2023 edition of the PSCU Payments Index, February’s growth rates for transactions and purchases continue to converge for both credit and debit in the mid-single digit range. In this month’s Deep Dive, we look at two sectors with the highest year-over-year growth in purchases: Travel (discretionary spending) and Transportation (non-discretionary spending).

“While overall consumer spending growth remains positive, it continues to trend in single-digit growth ranges,” said Yvonne Stelpflug, SVP, Advisors Plus at PSCU. “As discretionary and non-discretionary spending remains moderate, in this month’s Deep Dive we explore the two sectors experiencing the highest year-over-year growth in Travel and Transportation. After declines amid the pandemic, the travel industry continues its positive recovery with cruise lines and international air travel leading the largest growth. In the non-discretionary Transportation sector, growth in mass transportation is seeing the largest increases as a result of more employees returning to the physical workspace.”

A sampling of key takeaways from the March report includes:

• Consumer spending growth on payment cards remained positive in February. Credit purchases and transactions were both up 6% year over year. Debit purchases were up 7% and transaction growth was up 5% for February.

• The Consumer Price Index (CPI-U) decreased on an annual basis to 6.0% in February, down by 0.4 percentage points. Shelter accounted for 70% of the all-items increase. While Fed Chairman Jerome Powell has signaled for another subsequent rate increase at the Fed’s next meeting on Mar. 21-22, recent bank collapses may curtail the anticipated near-term increase.

• Transaction growth in both discretionary and non-discretionary spending categories moderated in February. Growth in transactions for essential goods and services grew by 5% for credit and 4% for debit. In the discretionary category, credit transactions grew by 6% and debit transactions grew by 10%.

• Growth in the discretionary spending Travel sector remains strong, with credit purchases up 18% and debit purchases up 16%. The strength within this sector comes from both cruise lines and airlines, with strong growth with non-U.S. based airlines. Cruise line purchases grew 118% for credit and 155% for debit year over year. For non-U.S. based airlines, credit purchases were up 48% and debit purchases were up 32%.

• Transportation, which represents a small portion of overall activity, yields insight into the return to physical work locations. For February, credit transactions and purchases were up 21%. Debit transactions were up 16% and purchases up 15%. Within this sector, top growth categories include mass transit (subways, bus and rail), with credit purchases growing 31% and debit purchases growing 28%.

• The credit card delinquency rate for February finished at 2.01%, above February 2019 pre-pandemic levels. Total credit card balances were up 13.8% for February compared to a year ago, while the average credit card balance for active accounts was $2,918, up 8.4% (or $226) year over year.

 The full report is available for download here or can be shared as a PDF upon request. Additionally, feel free to subscribe here to receive updates when the PSCU Payments Index is published each month.