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PSCU Payments Index – July 2022 Edition

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Today, PSCU – the nation’s premier payments credit union service organization (CUSO) – published the July edition of the PSCU Payments Indexthe goal of which is to provide information and insights to help financial institutions make informed, strategic decisions on the road ahead.

In this month’s report, consumer purchasing activity remains strong with the continued outpacing of credit card growth over debit cards. This month’s Deep Dive looks at performance within the discretionary spending sectors of Travel and Entertainment.

In the Labor Department’s July 13 update, the Consumer Price Index (CPI) increased 1.3% during the month of June, bringing the 12-month rate of inflation to 9.1% – the highest level in more than 40 years, increasing the challenges for the Federal Reserve. Top growth sectors included Gasoline, Food and Shelter. The Bureau of Labor Statistics (BLS) reported the June 2022 unemployment rate was unchanged from the prior three months at 3.6% as 372,000 jobs were added to the economy last month.

The Consumer Confidence Index decreased in June to its lowest level since February 2021, now at 98.7 (1985=100). Consumer concerns continue to be based on overall inflation and its direct impact on gasoline and food prices. Summer vacations are in full swing and consumer spending is poised to remain elevated with the added federal holiday of Juneteenth observed on June 19.  In July, Amazon and other “big box” retailers have their Prime Day and related sales events.  With the glut of goods at many large retailers, discounts could be larger than expected in the coming weeks to move merchandise.

“While overall consumer spending remained strong throughout June, current inflationary pressures are keeping growth in purchases outpacing growth in transactions. With another record Consumer Price Index increase announced this month, the Federal Reserve is under continued significant pressure to tame soaring inflation,” said Brian Scott, SVP, chief growth officer, PSCU. “In this month’s Deep Dive, we explore the Travel and Entertainment sectors where spending has rebounded over the past year – but is beginning to soften, signaling a potential slowdown in discretionary spending amid the rising threat of an impending recession.”

A sampling of key takeaways from the July report includes:

  • Consumer spending on cards remained strong, with credit purchases up 16% and debit purchases up 7% year over year. Current inflationary pressures are keeping growth in purchases outpacing growth in transactions. For June, growth in overall credit transactions were up 12% and debit transactions were up 3%.
  • The Consumer Price Index (CPI-U) increased on an annual basis to 9.1% in June, which was a 1.3% increase from May and heightens the pressure on the Fed to reign in the highest level of inflation since 1981. The Fed will meet on July 26-27 to evaluate future interest rate hikes with the hopes of creating a soft landing from inflation and ultimately avoiding a recession.
  • While discretionary spending in the Travel and Entertainment sectors remains strong with year-over-year credit purchases up 26% and debit purchases up 7% for the combined sectors, transaction growth is now an important metric to watch, looking beyond the inflationary impacts to understand shifting consumer trends. For June, transaction growth for the overall Travel and Entertainment sectors was up 26% on credit and up 19% on debit as compared to June 2021. Notable transaction growth within this grouping includes movie theaters (up 147% for credit and up 96% for debit) and air travel with non-U.S.-based carriers (transactions up 104% for credit and 42% for debit). Transaction growth for U.S.-based airlines was down 1% on credit and down 20% on debit, all compared to June 2021.
  • The average credit card balance for June 2022 was $2,733, up 3.5% (or $93) year over year. June marked the fourth consecutive month in which year-over-year growth was over 2%. The credit card delinquency rate for June was 1.54%, 20 basis points lower than pre-pandemic June 2019 levels.

The full report is available for download here or can be shared as a PDF upon request. Additionally, feel free to subscribe here to receive updates when the PSCU Payments Index is published each month.

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