RANCHO CUCAMONGA, Calif. –The “big news” to be found in the economic and consumer spending data in March is that consumer spending is returning to historically typical behavior patterns and showing robust increases across every major category, according to the newest analysis released by Co-op Solutions.
As Co-op noted in releasing the newest numbers, “as unremarkable as it may seem, seasonal predictability has been largely missing over the past two-plus years, thanks to the pandemic and its associated economic volatility.”
According to CO-OP, March’s economic data continued the mostly positive trend of the past few months, as nonfarm payrolls grew by 431,000 in March and the unemployment rate declined once again to 3.6%, barely above the 50-year record low just prior to the pandemic.
“Inflation is high, and though gas prices have started to trend down in recent days, they are still at historical highs and expected to remain volatile with Americans paying an average of $4.16 per gallon, $1.30 higher than a year ago,” according to Co-op. “Economists are expressing concern around a potential recession later this year or into 2023, as the Federal Reserve aggressively raises its benchmark interest rate to counteract inflationary pressures over the next several months.”
According to Co-op some key spending trends its Co-op SmartGrowth Consulting Team are watching this month include:
Every Merchant Category Grew Month-over-month
Co-op reported its March credit union spending data showed double-digit month-over-month increases in every major category across both the debit and credit portfolios. The Dining & Entertainment, Gas, Lodging, Medical, Retail, Travel Campers & Camping, Home Improvement and Sport/Recreation categories were all particularly strong, the company said.
“The challenge for consumers – which may be the fly in the ointment for a while yet – continues to be supply chain disruption, coupled with long waits for goods and services due to deferred demand over the past two years,” Co-op stated.
As a case in point Co-op cited the wedding industry, where a report from NPR stated spending per wedding is expected to jump 15 to 25% this year due to pent-up demand, inflation and higher costs of labor and supplies.
“Spending patterns are stabilizing, and seasonality is back,” said Beth Phillips, director at Co-op Solutions. “At the same time, consumers continue to feel the aggravation of supply chain demand and the long wait times for receiving goods like furniture, vehicles and home appliances. It will take time for those supply bottlenecks to be course corrected. We’re still battling the pandemic from that standpoint.”
Credit Shows Strong Year-over-year Growth As Well
With the exception of the Campers & Camping merchant category, consumers are spending more on credit now than a year ago, Co-op stated, adding that in certain categories, such as Gas, Grocery, Retail and Computers the growth is significant – in the high double – and even triple digits.
Co-op’s SmartGrowth team said home Improvement is one area where, although month-over-month and year-over-year increases have been comparatively modest compared with categories like Gas, Travel and Computers, they expect spending to take off this spring.
“Home prices are still very high, and people are getting priced right out of the market,” said John Patton, senior payments advisor at Co-op solutions. “So, rather than try to sell their current residence and move into a more expensive home they may not be able to afford – and potentially lose all the equity they’ve built up over the years in selling and buying costs – many homeowners are choosing to stay on the sidelines and focus on renovation and remodeling projects.”
Credit Balances Are Beginning to Bud
According to Co-op, while the pandemic period was marked by relatively conservative spending and a decline in consumer debt, the last few months have seen consumers grow more at ease with once again carrying credit card balances.
The company said an analysis of Co-op credit unions’ credit portfolio data, while balances declined slightly in November and December of 2021, since the turn of the year they have started to grow. January saw 1% balance growth, in February it was 3%, and March saw 5% growth year-over-year.
“As consumers begin to revert to pre-pandemic spending behaviors, they are becoming more comfortable carrying some revolving debt,” said Phillips. “Our assumption is credit balances will continue to slowly build as we move through the year.”
What CUs Should Do Now
Co-op’s SmartGrowth Team is advising that it’s a great time to dust off balance transfer campaigns.
“Members are getting concerned with rising rates, so reward them with a low introductory rate balance transfer offer while reminding them of the credit union difference of competitive rates, low fees and exceptional service,” Co-op said. “A well-timed balance transfer campaign will help to grow a credit union’s portfolio balances and burnish its primary financial relationships.”
As spending picks up across every major merchant category, Co-op said rewards will become increasingly important. The SmartGrowth Team is also advising credit unions to make sure their loyalty rewards program is competitive with the leading programs, and to further dig into cardholder data to make sure spending is being incented in the categories members prefer in order to stay top of wallet, and top of mind.
For info on the Co-op SmartGrowth Consulting Team, go here.
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