RANCHO CUCAMONGA, Calif.— Economic uncertainty led to flat consumer spending in September, Co-op Solutions is reporting.
Overall, Co-op said its credit union portfolio data shows that September transaction volume rose by 4.2% in credit and 0.6% in debit on a rolling 12-month basis.
According to the company’s SmartGrowth Consulting Solutions, trends revealed in the most recent data include:
Strong Year-Over-Year Results in Credit
The company saidSeptember’s month-over-month spending was muted in both the credit and debit portfolios, credit posted strong year-over-year results in several categories, including amazon, digital goods, education, financial services and travel.
“We are seeing more everyday purchases moving toward eCommerce sites in general, and Amazon specifically,” says Ryan Prentice, director, consulting services at Co-op. “This includes household essentials like groceries, cleaning supplies and toiletries.”
Education Spending Jumps in September
According to Co-op, consumers completed much of their higher-education spending – including tuition, housing, textbooks and supplies – and by the end of August, September saw a big increase in spending at the elementary level. Per Co-op portfolio data, spending in the Elementary category jumped by 58% in credit and nearly 80% in debit for the month.
“Elementary spending really carried the Education category in September,” said John Patton, Co-op senior payments advisor. “Look for such spending to tail off through the remainder of the year, as back to school expenses and fees normalize.”
Pre-recession Spending Shows Uptick
Co-op reported that among the big month-over-month risers in September were categories like government lottery tickets, government/postal services, convenience checks, debt collection, employment agencies and bus lines.
“The common element among these merchant categories is that they are considered leading indicators of a potential recession – an alarming sign that the American consumer is facing stress,” Co-op said. “Much of that pressure is stemming from stagnant household income growth, which has lagged inflation over the past year. The result has been an increase in household borrowing, including more consumers dipping into their credit lines.”
Credit Debt Continues to Grow
Year over year, credit transaction volume continues apace, with 4.2% growth on a rolling 12-month basis compared with just 0.6% for debit, according to the CUSO.
“Month over month tells a different story, however, as overall credit transaction volumes declined by -5.7%, and debit transaction volume fell by -3.3%, reversing a positive trend in both portfolios in August,” Co-op said.
“Despite this short-term decline, consumers are continuing to rack up credit card debt. Per Co-op portfolio data, credit balances grew by 14.18% from September 2022 to September 2023, including a month-over-month jump of 2.78% from August 2023. Post-COVID, this monthly increase in September balances is on par with prior years – average balance growth month-over-month in 2023 through September is 1.25% against a comparative .99% in 2022,” Co-op said. “More telling may be the increase in average total balances through September from 2019 to 2023. In 2023, total average balances through September increased 6% over the same period in 2019, 12% over 2020, 25% over 2021 and 14% over 2022.
Preparing to Write Off Funds
“The combination of this growth in credit balances and high interest rates has JPMorgan Chase & Co., Citigroup, Wells Fargo and Bank of America preparing to write off large amounts of consumer borrowings in their portfolios.”
Added Patton, “Once consumers reach 35-40% of their credit line usage, their credit spending tends to tail off dramatically. They will switch to other lines, shift to using debit or may curtail their spending completely.”
Year-Over-Year Category Level Spending (Rolling Year Average, and Comparing September 2022 to September 2023)
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