ST. PETERSBURG, Fla.–Strong consumer spending in the initial weeks of the holiday season can be seen in the latest PSCU Payments Index.
PSCU said the goal of the Payments Index is to provide “information and insights to help financial institutions make informed, strategic decisions on the road ahead.”
The strong consumer spending aligns with high demand and increasing pay for workers, said PSCU, which said the newest analysis is the first in a three-part Deep Dive into 2021 Holiday Spending.
“The holiday spending season got underway earlier than ever with Black Friday-style deals from major retailers showing up in early October,” said Yvonne Stelpflug, SVP, Advisors Plus at PSCU. “Strong consumer spending performance, including the first month of 2021 in which all sectors reported growth above 2019 levels for credit purchases, indicates that buyers are heeding the warnings of uncertainty as retailers grapple with supply chain difficulties and labor shortages. While the holiday season could be challenging for both retailers and consumers, we do anticipate strong demand and a rise in overall spend. In this month’s Deep Dive, we begin a three-part series on Holiday Spending to monitor ongoing trends throughout the 2021 holiday shopping season.”
The Key Takeaways
Among the key takeaways from the latest report, according to PSCU:
- Consumer spending remained strong for both credit and debit purchases as the Consumer Confidence Index increased in October, reversing a three-month downward trend.
- Two positive indicators over the last month were centered around credit card usage. October marked the first month of 2021 in which all sectors reported growth above 2019 levels for credit card purchases, while the overall credit card delinquency rate has remained 61 basis points lower than 2019 results for two months, finishing at 1.32%, PSCU said.
- Inflation increased again as the CPI-U for October rose to 6.2% year over year, now a 31-year high. The 0.9% increase over September included notable increases in energy costs. Continued inflationary pressures could prompt the Fed to raise interest rates in 2022.
- Workers remain in short supply as many retailers are paying premiums for seasonal holiday staff. The unemployment rate fell to 4.6% in October as 531,000 jobs were added during the month. At the same time, the number of jobs created in August/September was adjusted upwards by 235,000 in total by the BLS.
- “From our Holiday Spending deep dive, Goods sector purchases were strong, with credit up 13.6% and debit up 9.5%,” PSCU said. “Retailers are luring shoppers in early as they work to ensure Black Friday is not rife with supply chain issues and staff shortages, which could lead to inventory problems, higher prices and shipping delays.
The full report is available for download here