PSCU Payments Index - January 2023 Edition

Kate Rogers

​Today, PSCU – the nation’s premier payments CUSO and an integrated financial technology solutions provider – published the January 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.
 
The 2022 holiday shopping season has concluded, with consumer holiday spending trending upward in the final weeks of 2022. Consumer confidence ended the year on a positive note, as inflationary pressures show signs of slowing, while continued interest rate hikes are positioning the economy for a cool-down period, as intended. In our January 2023 edition of the PSCU Payments Index, we present the final installment of our annual three-part Deep Dive on holiday spending.
 
December’s growth rates finished slightly better than November’s growth rates for credit and debit cards. The Bureau of Labor Statistics (BLS) reported in its December 2022 jobs report that 223,000 jobs were added for the month, the smallest monthly gain in two years and a sign that the job market appears to be losing momentum. However, the unemployment rate dropped to 3.5% in December, equaling the pre-pandemic low point of February 2020. In the Labor Department’s Jan. 12 update, the Consumer Price Index (CPI) declined by 0.1% for the month of December, bringing the 12-month rate of inflation to 6.5%. The largest contributor to the decrease was gasoline, offsetting the increase in the housing sector. The Federal Reserve will meet next Jan. 31-Feb. 1 and the market is anticipating a 0.25% to 0.50% interest rate increase. The Consumer Confidence Index increased sharply in December to 108.3 (1985=100), up following back-to-back monthly declines, while the New York Fed’s Survey of Consumer Expectations shows greater consumer optimism relative to inflation in the coming year.
 
The national average price per gallon of gasoline increased to $3.31 for the week ending Jan. 16, up from the same time last month but virtually flat year over year. As China retracts most of their COVID travel restrictions, there should be an increase in the worldwide demand for gasoline, which may ultimately affect domestic gas prices in the United States in 2023.  
 
“During the fourth quarter, we saw our members’ spending increase as the number of transactions per card held flat, an indication that the industry increase in holiday spending could be attributed to higher prices – not just higher purchase volume and elevated consumer confidence. This holiday season, our members also spent more on travel and transportation than a year ago, with automobile rental, transportation and airline spend increasing more than 40% per transaction, with the highest increases on credit cards,” said Kate Rogers, vice president of Digital Payments and chief innovation officer, University of Illinois (U of I) Community Credit Union. “As consumers have refocused their budgets on essential items to combat inflation, we also saw increases per transaction reflected in experiential data, with up to double-digit increases in utilities and car repairs.”
 
A sampling of key takeaways from the January report includes:

• Consumer spending growth on payment cards in December finished slightly better than November. Credit card growth results continued to deflate as the year progressed before an uptick in December, while debit card growth was mainly consistent for 2022 and lower than growth on credit cards. For December, credit purchases were up 6.2% and debit purchases were up 3.7% year over year, while credit purchases were up 15.2% and debit purchases were up 5.2% for the full year. Inflationary pressures contributed to growth in purchases outpacing growth in transactions for the full year. For 2022, growth in overall transactions was up 12.0% for credit and 3.1% for debit.
• The Consumer Price Index (CPI-U) decreased on an annual basis to 6.5% in December. Gasoline prices had the largest contribution to the decline, with the energy index decreasing 4.5%. The next Fed meeting will occur Jan. 31-Feb. 1, when it is anticipated that interest rates will increase by an additional 25 to 50 basis points.
• Year-over-year growth in holiday spending for the Goods sector improved in December as compared to November. Year-over-year growth in purchases for the overall Goods sector was up 3.4% for credit and up 6.9% for debit in December. For the cumulative holiday period in the Goods sector, growth in credit purchases was up 2.0% and growth in debit purchases was up 4.6%. Both Amazon and Walmart posted similar year-over-year results, with growth in credit purchases outpacing growth in debit purchases, while Target’s growth results were nearly flat compared to 2021.
• The December average credit card balance per active account was $2,917, up 7.1% (or $193) year over year. The credit card delinquency rate for December was 1.98%, marking the second straight month in which the difference when compared to the monthly pre-pandemic 2019 levels has been five basis points (November and December).

 
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.

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