Holiday Spending a Focus of New PSCU Payments Index Report

Consumer purchasing growth for credit cards in October was the lowest of 2022, while growth for debit remained where it has been throughout the year, according to payments credit union service organization (CUSO) PSCU.

In addition, holiday spending is off to a slow start, evidenced by fewer purchases of clothing and sporting goods, PSCU said in the November edition of its PSCU Payments Index.

“In some good news, despite economic concerns, consumers are looking forward to the holidays; however, many have ‘tightened their belts,’” Accenture Managing Director Casey Merolla said in the report.

The report attributes this pullback in spending to consumers’ fears of recession and the effects of high inflation.

It noted that the 12-month inflation rate now stands at 7.7%, the Federal Reserve raised interest rates on Nov. 2 for the fourth straight month and the unemployment rate increased to 3.7% in October.

“Even Thanksgiving dinner is expected to be more expensive this year, with costs predicted to be at least 13.5% higher for U.S. consumers compared to 2021 prices,” the report said.

In today’s environment, inflationary pressures are contributing to growth in purchases that is outpacing growth in transactions. While credit purchases were up 10% year over year in October, credit transactions were up only 8%. Similarly, while debit purchases were up 5% year over year in October, debit transactions were up just 3%.

With consumers dialing back on their holiday spending, retailers are boosting their promotions and discounting, Merolla said in the report.

“Holiday success for retailers will likely come from four key areas: enticing in-store experiences, meeting consumer demands for virtual goods and services, effectively processing returns in the face of ongoing supply chain and delivery partner challenges, and attracting and retaining additional workers for the busy holiday shopping season,” Merolla said.

In related news, Adobe Analytics predicted in October that online holiday-related commerce is expected to grow slowly or even dip this year, due to inflation, retailers offering the wrong sorts of products and merchants offering discounts early to reduce their excess inventory.