Today, PSCU published the January 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.

Continued evidence of a soft economic landing, as well as softening consumer spending, closed out 2023. In the January 2024 edition of the PSCU Payments Index, we present the third installment of our three-part Deep Dive series on holiday spending, which includes insights into holiday season Buy Now, Pay Later (BNPL) activity. According to Adobe Analytics, BNPL usage hit an all-time high, up 14% year over year for the November and December timeframe.

The Consumer Confidence Index surged in December to 110.7 from a revised November result of 101.0. Reflecting a more positive outlook on business conditions, job availability and incomes, consumer expectations for the next six months also increased.

In the Labor Department’s Jan. 11 update, the Consumer Price Index (CPI) increased 0.3% in December, bringing the 12-month rate of inflation to 3.4%, with Shelter contributing to over half the increase. Core CPI, which excludes the Food and Energy sectors, rose 3.9% year over year, up 0.3% from November. The next Federal Open Market Committee (FOMC) meeting is scheduled for Jan. 30-31, with greater uncertainty on the path of rate changes possible for 2024.

December 2023 job growth was higher than expected at 216,000 as reported by the U.S. Bureau of Labor Statistics. Job gains trended up in government, health care and social assistance, while the overall unemployment rate for December held steady at 3.7%, or 6.3 million people.

Two key government funding dates on the near-term horizon are Jan. 19 and Feb. 2. As Congress returns from its winter break, legislators are faced with the need to pass multiple funding bills to keep the government open. Negotiations will certainly include funding requests for border security and the ongoing wars in Israel and Ukraine. We will continue to monitor these developments, as substantial economic impacts are typical byproducts of any government shutdown.

“Amid the economic uncertainty that marked 2023, we saw retailers pull out all the stops to lure shoppers in throughout the holiday season, leveraging innovative new techniques – including augmented reality, TikTok purchases, and even a 23-part holiday romantic comedy from Walmart with purchase opportunities broadcast via social media channels,” said Julie Conroy, chief insights officer, Datos Insights. “Most estimates showed that consumer holiday spending increased year over year, buoyed by holiday sales starting earlier than ever. Concurrently, the migration to e-commerce continued to climb, with JPMorgan Chase estimating that approximately 23.4% of holiday sales took place online in 2023 – up from 22.5% in 2022. Fraudsters also love the ongoing digital shift, forcing merchants and issuers alike to contend with fraud on many fronts, from first-party fraud to scams and account takeovers.”

A sampling of key takeaways from the January report includes:

• Debit purchase growth, up 4.9% for December, continued to outpace growth in credit purchases, up 0.7%. For transactions, credit grew 2.6% and debit grew 5.0% year over year.

• Holiday spending growth in the Goods sector softened in December when compared to November. Year-over-year growth in purchases for the overall Goods sector was down 1.3% for credit and up 2.9% for debit in December. For the cumulative holiday season, purchase growth in the Goods sector was down 1.2% for credit and up 2.7% for debit. For the cumulative holiday season, growth in CNP transactions (+2.2% for credit and +7.0% for debit) outpaced growth in CP transactions (-0.8% for credit and +0.9% for debit).

• The Consumer Price Index (CPI-U) increased 0.3% in December, while the 12-month rate of inflation was up 3.4%. Shelter contributed to more than half of the increase. Excluding the volatile Energy and Food sectors, the core CPI index increased 0.3% in December, putting the 12-month Core CPI index at 3.9%

• Growth in Buy Now, Pay Later (BNPL) payments for the top BNPL merchants increased 24% for the cumulative holiday season (October to December) compared to 2022. These BNPL transactions represented 3.6% of the overall debit transactions in the Goods sector for the three-month period.

• The credit card delinquency rate continued to increase in December, reaching 2.53%, an increase of seven basis points from November and the highest point when compared to pre-pandemic 2019 data.