The Velera Payments Index: June 2024
Today, Velera – formerly PSCU/Co-op Solutions, published the June edition of the Velera 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.
Consumer spending in debit accelerated in May 2024 while credit spending softened, yet remained positive. Mixed economic indicators keep the hope of a 2024 rate decrease on the table, at least for now. In our June 2024 edition of the Velera Payments Index, we revisit a Deep Dive into Gasoline, which has notably contributed to the higher-than-desired rate of inflation – but has recently experienced stabilization in this non-discretionary spending category.
After three months of declines, the Consumer Confidence Index increased in May to 102.0 from a slightly upward revised April result of 97.5. While encouraged by the labor market, consumer confidence in current business conditions dropped. Conversely, the University of Michigan Index of Consumer Sentiment decreased 8.1 points to 69.1 for May, following three months of very little change. The drop in sentiment was primarily attributable to consumer outlook on the labor market (with an expected increase in unemployment) and slowing income growth. Sentiment on personal finances was mainly unchanged for the month.
Jobs grew more than expected in May with 272,000 jobs created, higher than the monthly gain over the past 12 months of 232,000 jobs, and much higher than the expected growth of 185,000 jobs for May. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate for May changed little at 4.0%, or 6.6 million people. Job gains occurred in healthcare, government, leisure and hospitality and professional, scientific and technical services.
In the Labor Department’s June 12 update, the Consumer Price Index (CPI) was unchanged in May, bringing the cumulative 12-month rate of inflation to 3.3%. Shelter was up 0.4 percent, more than offsetting a decline in gasoline. Additionally, the food index increased 0.1 percent in May. Core CPI, which excludes the Food and Energy sectors, increased 0.2% for May and brings the 12-month Core CPI rate to 3.4%.
While there have been mixed signs the economy is cooling, there is little interest in rate reductions, at least in the very near term. In the Fed’s June 12 update, 11 of 19 policymakers felt no more than one rate cut is possible for the balance of 2024. The next Federal Open Market Committee (FOMC) meetings conclude on July 31.
“Consumer spending throughout the month of May 2024 showed an increase in debit card activity, while credit activity softened,” said Mike Bell, Vice President, Insights at Velera. “In this month’s Deep Dive, we revisit the Gasoline sector, where the replenishment of the U.S. Strategic Petroleum Reserves has helped stabilize fuel prices since the peak in 2022. As the electric vehicle market has grown in recent years, we also take a first look at spending in the Electric Vehicle Charging merchant category.”
A sampling of key takeaways from May includes:
For May, growth rates improved for debit and softened for credit year over year. Debit purchases were up 6.4%, with a third of the debit growth coming from Money Services, while credit purchases were up 0.1%. Debit transactions were up 4.5% and credit transactions were up 1.8% year over year.
The Consumer Price Index (CPI-U) was unchanged in May, while the 12-month rate of inflation dropped to 3.3%. While Shelter continues to be a top contributor to inflation, the gasoline index dropped 3.6% in May. Excluding the volatile Energy and Food sectors, the core CPI index decreased 0.2% from April, putting the 12-month Core CPI index at 3.4%.
Growth in the Gasoline sector (this month’s deep dive), with debit purchases up 2.4% and credit purchases up 0.3%, was mainly attributable to Service Station activities – which may include non-fuel purchases. Growth in true gasoline purchases at Automated Fuel Dispensers (AFDs) was modest, with debit AFD purchases up 0.7% and credit AFD purchases up 0.1% year over year.
The credit card delinquency rate was unchanged in May compared to April, finishing at 2.34%. Year over year, the percentage of balances delinquent was up 48 basis points from 1.86%.
The full report is available for download here or can be shared as a PDF upon request.