ST. PETERSBURG, Fla.—Higher prices for many goods and services are still weighing on consumer spending decisions, according to a new PSCU report that also takes a deep dive into the money services sector.
The company’s latest Payments Index finds the continued trend of slower year-over-year growth for both credit and debit. In May, year-over-year growth in credit card purchases was negative for the first time since August 2020, PSCU reported.
“While still positive, growth in debit card purchases exhibited a similar softening trend. This month’s Deep Dive highlights our money services sector, which has a more notable share of overall debit activity as compared to credit and includes peer-to-peer (P2P) activity of merchants and payment facilitators such as Cash App, Venmo and PayPal,” PSCU said.
11th Monthly Drop
As CUToday.info reported and as PSCU noted, the Labor Department’s June 13 update, the Consumer Price Index (CPI) increased by 0.1% in May. The annual rate of inflation dropped from 4.9% through April to 4.0% through May.
“While this is the eleventh consecutive monthly drop in the annual rate from the peak of 9.1% in June 2022, it remains higher than the Fed’s target annual inflation rate of 2.0%,” PSCU said. “The largest contributor to inflation continues to be shelter, followed by used cars and trucks.”
The energy index declined 3.6% in May, which includes gasoline.
‘Trending in Right Direction’
“As inflation continues to cool, it’s trending in the right direction. Yet consumer spending continues to slow, indicating consumers are likely being more financially cautious,” Denise Stevens, SVP, chief product and digital officer at PSCU, said in a statement. “In May, credit card purchases experienced negative year-over-year growth for the first time since August 2020. While debit card purchases experienced positive growth, the softening trend is evident.
“In this month’s Deep Dive into the Money Services sector, we see peer-to-peer (P2P) payments driving the largest growth, with the volume of debit activity notably greater than credit,” Stevens added.
Key Takeaways
According to PSCU, key takeaways from its newest report include:
- For the first time since the summer of the COVID-19 pandemic (August 2020), year-over-year growth in credit purchases was negative, finishing at -0.8% for May. Growth in debit purchases was positive at 1.6% for May and was half the reported growth from April 2023. Growth in transactions in May continued to be stronger than growth in purchases
- For credit purchases, the largest contributor to growth was the Services sector (1.36 percentage points of growth) while offset by reductions in Gasoline (1.15 percentage points) and the Goods sector (1.03 percentage points). For debit purchases, two sectors generated the highest growth, with Services contributing 1.1 percentage points and Money Services contributing 0.9 percentage points. Debit purchases were offset by a reduction of 1.3 percentage points in Gasoline. Credit transactions were up just 0.4% and debit transactions were up 2.1%.
- The Consumer Price Index (CPI-U) decreased on an annual basis from 4.9% to 4.0% in May. For the fourth consecutive month, shelter accounted for the majority of the all-items inflationary increase. Money Services represented 10.7% of overall debit purchases in May and includes peer-to-peer (P2P) payments with Cash App, Venmo and PayPal. There is notable growth in this sector when considering that for the pre-pandemic May 2019 timeframe, Money Services represented 3.8% of overall debit purchases. P2P payments are used at a greater rate by the youngest age demographic (Gen Z), representing 15.4% of their overall debit purchases
- Growth in non-discretionary spending was negative on credit cards at -2% for May and up 1% for debit cards year over year. Discretionary spending again grew at a greater rate than non-discretionary spending, with credit up 2% and debit up 9%. Transaction growth on credit cards was up 1% for discretionary transactions and flat at 0% for non-discretionary transactions. Transaction growth on debit cards was up 9% for discretionary and up 1% for non-discretionary transactions
- The credit card delinquency rate for May finished at 1.86%, above the May 2019 pre-pandemic level by 0.16%. Total credit card balances were up 12.7% for May compared to a year ago, while the average credit card balance for active accounts was $2,962, up 8.7% (or $238) year over year.
The full report is available for download here.
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