PSCU Payments Index: March 2024
PSCU has published the March 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.
While consumer sentiment indexes showed mixed optimism, actual consumer spending remained steady for February 2024. In the March 2024 edition of the PSCU Payments Index, we revisit a Deep Dive on Gambling on the heels of record-breaking bettingoccurring around Super Bowl LVIII on Feb. 11. Additionally, Goldman Sachs estimatesthat the growing U.S. sports betting market, which currently drives $10 billion in spend annually, could reach $45 billion at maturity.
Following three months of gains, the Consumer Confidence Index dropped in February to 106.7, down from a revised January result of 110.9 as economic uncertainty persists. The University of Michigan Consumer Sentiment Index was flat in February, down two index points and holding the gains of the prior three months. Consumers in this survey appear more confident of the continued favorable trajectory of inflation.
February 2024 was another month of strong job growth, with 275,000 new jobs reportedby the U.S. Bureau of Labor Statistics. The overall unemployment rate for February increased to 3.9%, or 6.5 million people. Average hourly earnings increased 0.1% from January, which was much lower than the revised January growth of 0.5%. Job gains trended up in healthcare, government, food services and drinking places, social assistance, and transportation and warehousing.
In the Labor Department’s March 12 update, the Consumer Price Index (CPI) increased 0.4% in February, bringing the 12-month rate of inflation to 3.2%. Shelter and Gasoline, when combined, contributed to 60% of the increase. Core CPI, which excludes the Food and Energy sectors, rose 3.8% year over year, up 0.4% for each of the past two months.
Federal Reserve Chair Jerome Powell told lawmakers on March 7 that the central bank was “not far” from the point where interest rates could be cut. The subsequent slightly higher than expected inflation and strong jobs report will further fuel the “wait and see” approach for any rate reduction. While it appears with additional certainty that inflation is heading toward its target rate of 2%, an interest rate cut is not on the table for the next Federal Open Market Committee (FOMC) meeting on March 19-20.
“Overall spending remained steady throughout February, despite a slight dip in consumer sentiment,” said Karen Postma, Senior Vice President, Risk Solutions, PSCU/Co-op Solutions. “In this month’s Deep Dive, we revisit online gambling transactions within the Entertainment sector. As even more states have legalized online gambling over the past few years, sports betting activity has become more mainstream through merchants such as FanDuel, DraftKings and BetMGM. While online gambling was once viewed negatively, it now represents a growth segment opportunity, particularly among younger demographics. This growth presents an opportunity to keep internal staff informed about this evolving transaction trend, as well as provide members with financial wellness education.
A sampling of key takeaways from the March report includes:
Including Feb. 29 (“leap day”), debit purchase growth was 7.1% for February, continuing to outpace growth in credit purchases, which were up 3.6%. For transactions, debit grew 6.8% and credit grew 5.5% year over year.
On a normalized basis (omitting leap day) debit purchases were up 2.7% and credit purchases were down 0.4%. Debit transactions were up 2.8% and credit transactions were up 1.6%. This normalized view provides cleaner insight into consumer behavior, which is generally steady from the previous month. (All comparisons in this edition are based on normalized February 2024 results, unless specifically noted).
The Consumer Price Index (CPI-U) increased 0.4% in February, while the 12-month rate of inflation was 3.2%. Shelter and Gasoline contributed 60% of the increase. Excluding the volatile Energy and Food sectors, the core CPI index increased 0.4% from January, putting the 12-month Core CPI index at 3.8%.
Gambling, fueled by further expansion of Government Licensed Internet Gambling to a total of 38 states, posted strong results in February. Debit purchases were up 39%, while credit purchases were up 11%. The top three merchants (FanDuel, DraftKings and BetMGM) represented over 70% share of purchases in this single category that peaked in February, with Super Bowl LVIII occurring in Las Vegas on Feb. 11.
The full report is available for download here or can be shared as a PDF upon request.