RANCHO CUCAMONGA, Calif. –As the holidays arrive, payments transactions are up, reports Co-op Solutions, which is forecasting spending over the next two months could reach “record levels.”
Overall, Co-op credit union portfolio data shows that October transaction volume rose by 4.3% in credit and 1.2% in debit on a rolling 12-month basis.
Turning to the holidays, Co-op said retailers are expressing cautious optimism, with the National Retail Federation (NRF) predicting that holiday spending in November and December will rise by 3% to 4% over 2022, reaching “record levels” of between $957 billion and $966.6 billion for the season.
“Co-op’s proprietary analysis of its credit union credit and debit portfolios supports this sentiment, the company said. “Co-op forecasts that month over month transaction volume within the retail merchant classification will rise by 4.0% in November, before jumping by 23.6% in December.”
The company noted the analysis is subject to a forecasting error of less than or equal to 5%.
What’s Being Watched
According to Co-op, its SmartGrowth team is watching the following trends:
- Amazon Gets October Prime Day Boost. “The Amazon/Bookstores merchant category has been one of the strongest performers over the past year among Co-op’s credit union payment portfolios, posting gains in October of 22.8% in credit and 47.4% in debit on a year over year rolling month basis. Amazon recently announced its third quarter revenues grew by 13%, beating expectations. Contributing to this growth has been strong online retail sales, buoyed by the July Prime Days. In October, the eCommerce giant held a second event called Prime Big Deal Days, which executives claimed outperformed last year’s early holiday sale. The company had announced plans to hire 250,000 additional staff to support increased holiday season volume,” Co-op said.
- Discount Spending Signals Financial Stress. Continuing a recent trend, categories including Discount Stores, Secondhand Stores, Government Lottery Tickets, Government/Gambling, Cash Advances, CU Services and Debt Collection all showed strong month over month growth in October, Co-op said. “Co-op’s SmartGrowth team members note that such spending is a sign that American households are facing financial headwinds, as they confront stubbornly high prices for many staple goods, a rising debt burden and high costs of borrowing,” the company added.
- Shifting Spending. Meanwhile, Co-op noted the Federal Reserve Bank of New York reports that U.S. consumer credit card debt topped $1 trillion in the third quarter. In addition, delinquencies are growing, especially among millennials and those holding auto and student loans. “Over the past few months, we’ve observed consumers beginning to shift their spending away from luxury goods,” said Ryan Prentice, director, SmarthGrowth Consulting Services at Co-op. “They are trying to gain back control over ballooning household debt by shopping at discount retailers and thrift stores as common-sense options.”
- Travel, Leisure Prove Recession-Resistant. Despite the belt-tightening, Co-op said some non-essential spending categories appear to be recession-resistant. Overall, the Dining & Entertainment merchant category was up 5.5% in credit for October, and 3.1% in debit. Double-digit gains in credit transaction volume were seen in the Amusement Parks, Arcades, Billiards and Bowling, Movie Theaters and Theater categories, while Tourist Attractions jumped nearly 50% over September. Transaction volume in the Travel category was up 7.3% in credit and 3.8% in debit month over month in October. Significant volume gains were seen in the Auto Rental, Bus Lines, Lodging and Taxi/Limo categories, Co-op added.
Ongoing Resilience
“If there’s one trend we’ve observed throughout this post-pandemic period of uncertainty, it’s the resilience of the American consumer,” said John Patton, Co-op senior payments advisor. “Unless economic indicators take a sharp turn south, we expect households to keep spending.”
Year-Over-Year Category Level Spending (Rolling Year Average, and Comparing October 2022 to October 2023)
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