ST. PETERSBURG, Fla.—Improvement can be seen in both credit and debit performance by cardholding CU members during June, according to the July report of PSCU’s Payments Index.
The Key Takeaways
Key takeaways from the July report, according to PSCU:
- After a decline in May, year-over-year growth in credit purchases rebounded in June, finishing up 1.7%. Growth in debit purchases also grew, up 4.3% for June. Transaction growth for June continued to be stronger than growth in purchases, with credit up 4.1% and debit up 5.0%
- For credit purchases, the largest contributor to growth continued to be the Services sector (1.3 percentage points of growth) while again offset by a reduction in Gasoline (1.4 percentage points). For debit purchases, the two sectors that generated the highest growth for June were Money Services, contributing 1.7 percentage points, and Restaurants, contributing 1.0 percentage point. Debit purchases were offset by a reduction of 1.8 percentage points in Gasoline
- The Consumer Price Index (CPI-U) decreased on an annual basis from 4.0% to 3.0% in June, marking the lowest annual inflation rate since March 2021. Shelter accounted for over 70% of the all-items inflationary increase. The Fed has indicated that two additional rate increases in 2023 are likely, PSCU noted
- Purchase growth in the Services sector had the biggest impact in June for credit cards. While growth in most of the merchant categories in Services was marginally positive, the two common standout categories were Insurance and Medical/Healthcare. For the overall Services sector, growth in credit purchases was up 6.0% and debit purchases were up 6.6% for June with these top merchant categories contributing over half of the growth for the sector, PSCU said
- Credit card non-discretionary spending also rebounded from the negative growth in May, finishing up 0.8% for June. Non-discretionary spending for debit cards was up 3.2%, PSCU said. Discretionary spending continues to grow at a greater rate than non-discretionary spending growth, with credit up 4.9% and debit up 12.2%, PSCU reported
- The credit card delinquency rate for June finished at 1.94%, above the June 2019 pre-pandemic level by 20 basis points. Total credit card balances were up 13.1% for June compared to a year ago, while the average credit card balance for active accounts was $2,971, up 8.7% (or $238) year over year
‘Signs of Improved Sentiment’
“While consumers continue to feel financial pain from two years of high inflation and sharply increased borrowing costs, signs of improved sentiment were evident in the positive year-over-year credit and debit purchase growth in June,” said Norm Patrick, vice president, Advisors Plus Consulting at PSCU. “In this month’s Deep Dive, we explore the Services sector, which contributed to the largest share of positive overall growth for credit purchases. For now, resilient consumer spending and the strong job market are staving off the odds of a full-blown recession. The coming months will be key in determining the full effects of the Fed’s aggressive rate hikes.”
The full report is available for download here.
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