By: Yvonne Stelpflug, SVP, Advisors Plus at PSCU

The August edition of the PSCU Payments Index finds that consumer purchasing remains resilient, with credit card growth continuing to outpace growth in debit cards.

The Inflation Reduction Act of 2022 was passed along party lines and President Biden signed it into law on Aug. 16. The law includes $369 billion in energy security and climate change reform and lowers certain healthcare costs. The law also creates a 15% corporate minimum tax for companies with greater than $1 billion in income and reduces the deficit by more than $300 billion. The nonpartisan Congressional Budget Office expects the law to have a “negligible” effect on inflation in 2022 and into 2023, despite its name.

The Bureau of Labor Statistics (BLS) reported the July 2022 unemployment rate dropped to 3.5%, marking a return to the pre-pandemic level of February 2020, which tied for the lowest level since July 1969. There were 528,000 jobs added to the economy in July, especially in the Leisure and Hospitality (+96K), Professional and Business Services (+89K) and Health Care (+70K) sectors.

The Consumer Confidence Index decreased in July to 95.7, marking the third consecutive month it has dropped. As interest rates continue to increase, purchase intentions for large-ticket items like homes, cars and major appliances are expected to slow. While current gasoline per gallon prices are up 24% or $0.76 from a year ago, the average national gasoline price has dropped to $3.94 per gallon on Aug. 15. This is a welcome change for consumers, as the price is now down $1.06 or 21% from the peak in June 2022.

Key takeaways from our August report, which features a Deep Dive on Amazon Prime Day and the related big-box store sales in July, include:

Consumer spending on cards remained resilient, with growth on credit cards outpacing growth on debit cards. Credit purchases were up 13% and debit purchases were up 4% year over year. Current inflationary pressures continue to help growth in purchases outpace growth in transactions. For July, growth in overall credit transactions was up 10% and debit transactions were up 1%.

The Consumer Price Index (CPI-U) decreased on an annual basis to 8.5% in July, influenced by lower prices in Gasoline and higher prices in Food and Shelter. The gasoline index fell 7.7%, offsetting increases in the food and shelter indexes, resulting in the overall index being unchanged for the month. The Fed will not meet again until Sept. 20-21, following the next CPI-U update on Sept. 13. While another large interest rate increase is possible, the encouraging news from the lower CPI could warrant a less aggressive increase next month.

When compared to last year’s Amazon Prime Day sale (June 21-22), this year’s event (July 12-13) showed modest growth in overall purchases, with credit and debit both up 4%. However, the event still moved the needle – when comparing this year’s Prime Day sale event to the same dates in July 2021, credit purchases were up 55% and debit purchases were up 68%. It appears that Amazon is planning for a second sale in 2022, anticipated in the October timeframe.

Target Deal Days (July 11-13), showed overall growth in credit purchases by 7% and debit purchases were down 0.2% for the four-day year-over-year sales comparison. When comparing the July 2022 Target Deal Days sale results against the comparable dates in July 2021, credit purchases were up 15% and debit purchases were up 1%.

Walmart chose not to hold their “Deals for Days” to parallel Amazon this summer, stating that merchandise has been on sale for weeks already, in part to clear out excess inventory. Of the three large retailers, Walmart (excluding gasoline sales) posted the overall largest increase in purchases for both credit and debit. When comparing the July 2022 time period (when Walmart would have normally held its Deals for Days event) against the comparable four days in July 2021, credit purchases were up 17% and debit purchases were up 5%.

• The credit card delinquency rate for July was 1.61%, 18 basis points lower than pre-pandemic July 2019 levels. The average credit card balance for July 2022 was $2,769, up 4.7% (or $123) year over year. July marked the fifth consecutive month in which year-over-year growth was over 2%.

Looking Ahead

The Payments Index continues to evolve as consumer preferences and behaviors evolve. With the ongoing impacts of inflation, we will continue to watch transaction growth metrics as a key indicator of shifting trends. We hope these insights will help our credit unions to make informed, strategic decisions.

Yvonne Stelpflug has served as senior vice president, Advisors Plus at PSCU since September 2021. She joined PSCU in June 2019 as a managing vice president of Account Management and has more than two decades of financial services industry experience, working at credit union service organizations, card processors and financial institutions. With previous leadership roles in operations, product development and sales/account management, Yvonne also brings a wealth of expertise to grow and adapt to the changing payments environment and continue the forward momentum of Advisors Plus.