RANCHO CUCAMONGA, Calif.—A steady economy and brighter outlook for 2024 helped boost consumer spending during the holiday season Co-op Solutions reported.
Overall, Co-op said its credit union portfolio data shows that December transaction volume rose by 5.2% in credit and 1.9% in debit on a rolling 12-month basis, while month over month volumes were up by 4.8% and 7.2%, respectively.
According to Co-op Smart Growth team, it is watching:
The Co-op SmartGrowth Team members are watching the following key spending trends this month:
BNPL and Online Sales Provide Holiday Shopping Boost
Co-op said its data show retailers saw mixed results this holiday shopping season, as U.S. consumers shifted much of their gift purchasing habits online.
“eCommerce and buy now, pay later (BNPL) were the primary catalysts of 2023’s holiday shopping season,” according to the company. “U.S. shoppers spent $16.6 billion using BNPL in November and December, a 14% increase in volume over 2023. Meanwhile, according to Mastercard, online sales were up 6.3% over the 2022 holiday season, easily outpacing in-store sales, which showed a 2.2% lift year over year.”
Taken on the whole, Mastercard forecasts 3.1% growth in retail sales year over year, reflecting flat growth after accounting for inflation, Co-op added.
“Per analysis of Co-op’s client payment portfolios, December transaction volume within the Amazon/Bookstores merchant category was up by 29.5% in both credit and debit. On a rolling 12-month basis, the category was up 17.0% in credit and 32.0% in debit,” Co-op said.
Flat Growth in Retail
Co-op further noted the retail category also showed strong month-over-month results, posting gains of 12.7% in credit and 17.8% in debit, as to be expected during the busiest shopping period of the year. However, the category has showed flat growth over the past 12 months, with an increase of 2.1% in credit, and slight decline in debit at -0.8%.
“There’s been a major shift in shopping behavior over the past four years,” said Ryan Prentice, director, SmartGrowth Consulting Services, PSCU/Co-op Solutions. “Consumers have grown comfortable purchasing a wide variety of merchandise – from clothing and shoes to gifts and electronics – online. For many, this has become their go-to preference due to the added convenience.”
Travel Spending Levels Off
After a big drop in November, spending volume within the Travel merchant category leveled off in December, posting a decline of -2.1% month over month in credit, and a modest gain of 1.2% in debit, Co-op reported.
Despite this recent softening, the category remains elevated over the prior year on a rolling 12-month basis at 14.8% in credit and 7.8% in debit, the analysis added.
“Typically, travel is up in November and December as people prioritize visits with family during the holidays,” said John Patton, senior payments advisor, PSCU/Co-op Solutions. “But this year, with a recent uptick in Covid cases and seasonal ailments, more consumers are choosing to stay close to home out of an abundance of caution.”
Movies Light Up the Box Office
“With crowd-pleasing films like Barbie, Oppenheimer and The Super Mario Brothers Movie drawing the public back to the theater, Hollywood enjoyed its best box office returns since before the pandemic, as U.S. box office figures hit $9 billion for the first time since 2019,” Co-op said.
Indeed, according to Co-op client portfolio data, the Movie Theaters merchant category was up by 12.4% in credit and 8.7% in debit on a rolling 12-month basis. In December, the category showed transaction volume lifts of 13.6% in credit and 17.8% in debit over the prior month as “consumers sought escape from the holiday hustle and bustle with popular draws like Taylor Swift’s ‘The Eras Tour,’” the company stated.
“Looking back at 2023, economic highlights included the continuation of inflationary pressures that first arose in mid-2021 and the Fed’s ongoing rate hikes, both of which impacted consumers’ ability to purchase big-ticket items like cars, homes and major appliances,” Co-op reported. “These trends, coupled with the depletion of pandemic-era stimulus savings, led to a shift toward higher credit card use.
One Unfortunate Increase
“Unfortunately, this increased credit usage has led to higher balances (up 14.85% in 2023 compared to 9.96% in 2022), and a growing debt burden for consumers, and delinquencies have begun to rise as a result,” Co-op cautioned.
“Whereas traditionally consumers reserve credit for major purchases, we’re beginning to see households shifting more of their daily transactions toward credit as a way to conserve their cash,” said Prentice. “As we move into 2024, credit unions concerned with rising credit balances and delinquencies should seek to incent more debit usage through spend and get campaigns. It’s also a nice companion to deposit growth initiatives.”
Year-Over-Year Category Level Spending (Rolling Year Average, and Comparing December 2022 to December 2023)
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