PSCU Payments Index - September 2023 Edition
Today, PSCU published the July 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 erased gains from the past two months, actual consumer behavior remained steady for both credit and debit in this month’s PSCU Payments Index, even with a larger-than-expected inflationary increase for August. This month’s Deep Dive highlights the second largest annual spending event of back-to-school purchases for the month of August.
The Consumer Confidence Index dropped in August to 106.1 (1985=100), down from a revised 114.0 in July. This reduction offset sentiment increases from June and July updates. In the August survey, consumers again identified the general rise in prices with particular emphasis on groceries and gasoline.
In the Labor Department’s Sep. 13 update, the Consumer Price Index (CPI) increased by 0.6% in August, its largest monthly gain since June 2022. The annual rate of inflation increased from 3.2% through July to 3.7% through August. Energy prices rose 5.6% in August, including a 10.6% increase in gasoline prices, which fueled much of the overall CPI increase. Excluding the volatile energy and food sectors, core CPI increased 0.3%, slightly higher than estimates. The shelter index also increased 0.3% for the month, marking the 40th straight monthly increase. The next Federal Open Market Committee (FOMC) meeting is scheduled for Sept. 19-20.
For the first time in more than three years, federal student loans began interest accruals on Sept. 1, with payments set to resume in October – likely impacting disposable income for many beginning next month. Federal student loans represent 92% of the student loan market, with the average owed per borrower at $28,950.
Amidst reports of a cooling job market, the Bureau of Labor Statistics (BLS) reported in its August 2023 jobs report that 187,000 jobs were added for the month, with increased jobs in healthcare, leisure and hospitality, social assistance, and construction. Employment in transportation and warehousing declined. The overall unemployment rate increased by 0.3% to 3.8%, or 6.4 million people, for August.
“Overall spending behavior held steady in August, despite a slight dip in consumer confidence – proving the economy is remaining stronger than expected,” said Yvonne Stelpflug, SVP, Advisors Plus at PSCU. “As we look at back-to-school spending trends in this month’s Deep Dive, the larger retail merchants of Amazon, Walmart and Target experienced stronger growth than smaller clothing store merchants, who experienced notable reductions. Looking ahead, as federal student loan payments are set to resume in October, we expect to see household cutbacks in other areas and will monitor any potential impacts on the upcoming holiday shopping season.”
A sampling of key takeaways from the September report includes:
Consumer purchases remained buoyant in August. Debit maintained steady year-over-year growth, with purchase volumes up 5.8, while credit purchases were up 1.9%. Transaction growth remained positive, with debit up 5.2% and credit up 3.3% for the month.
For credit and debit purchases in August, the largest contributor to growth was the Services sector. Goods was the only notable category offsetting credit purchase growth, contributing to a 0.5% reduction. For debit purchases, all sectors contributed positively to year-over-year growth.
The Consumer Price Index (CPI-U) increased by 0.6% in August, its largest monthly gain since June 2022. Energy prices rose 5.6% in August, including a 10.6% increase in gasoline prices, which fueled much of the overall CPI increase. Excluding the volatile energy and food sectors, core CPI increased 0.3%, slightly higher than estimates.
In back-to-school merchant categories, purchase growth in debit, up 3.6%, aligned with the National Retail Federation (NRF) 2023 estimates of 3.0%. Year-over-year growth in back-to-school credit purchases was down 0.6%. Merchant categories representing larger retail merchants like Amazon, Walmart and Target posted stronger growth when compared to the overall back-to-school group.
The credit card delinquency rate increased again in August and finished at 2.11%, above the August 2019 pre-pandemic level by 35 basis points. Total credit card balances were up 12.2% for August compared to a year ago. The average credit card balance for active accounts exceeded $3,000 for the first time since February 2020, finishing August at $3,003, up 8.0% (or $223) year over year.
The full report is available for download here