June 16, 2022 – Today, PSCU – the nation’s premier payments credit union service organization (CUSO) – published the May edition of the PSCU Payments Index, the goal of which is to provide information and insights to help financial institutions make informed, strategic decisions on the road ahead.
This month’s report finds continued strong consumer purchasing activity amidst ongoing inflationary pressures, while our Deep Dive highlights consumer payment trends during the rapid rise of inflation. We take a look into contributing factors of spending growth over the past 17 months, in which the rate of inflation has risen from 1.4% to 8.6%.
In the Labor Department’s June 10 update, the Consumer Price Index (CPI) increased 1.0% during the month of May, bringing the 12-month rate of inflation to 8.6% – the highest level in more than 40 years. Top growth sectors included Shelter, Gasoline and Food. The Bureau of Labor Statistics (BLS) reported the May 2022 unemployment rate was again unchanged from the prior two months at 3.6% as more than 400,000 jobs have been added to the economy for each of the past 12 months. While this continued combination of strong job growth and low unemployment will likely fuel further consumer spending, inflationary pressures are driving lower real average hourly earnings and are influencing consumer card preference (credit versus debit), as well as sector activity. In our May results, credit card purchases were up 15% over 2021, while debit card purchases were up 6%.
“Overall consumer spending growth remained strong throughout May 2022, with the Gasoline sector experiencing the top growth rates in both credit and debit as fuel prices remain elevated,” said Brian Caldarelli, EVP and chief financial officer at PSCU. “The Consumer Price Index increased this month as we continue to face the highest level of inflation in more than 40 years. While the Federal Reserve announced another rate increase this week, a pause in the series of aggressive rate hikes is unlikely until inflation returns to an acceptable level. In this month’s Deep Dive, we explore the evolution of consumer behavior and spending growth as inflation has steadily surged over the past 17 months.”
A sampling of key takeaways from the June report includes:
- The Consumer Price Index (CPI-U) increased on an annual basis to 8.6% in May, which was a 1.0% increase from April – and the highest level of inflation since 1981. The Fed increased interest rates by 75 basis points on June 15, its largest rate hike since 1994.
- Consumer spending on cards continues to be strong, with credit purchases up 15% and debit purchases up 6% year over year. Gasoline posted top growth rates for all sectors in both credit and debit purchases in May and will continue to grow in June as the U.S. average price has surpassed $5 per gallon. Travel and Entertainment were second and third, respectively, for both credit and debit purchases in May.
- Consumer data indexed to January 2021 (when inflation was 1.4%) highlights the trend of greater growth in credit purchases (over debit) beginning in May 2021 and continuing through May 2022. Influenced by multiple criteria including pent-up demand in Travel and Entertainment, countered by cooling of purchases in the Goods sector, strong activity at Restaurants and high inflation fueled by the energy sector, the trend is expected to continue – and even widen – with waning consumer liquidity.
- The average credit card balance for May 2022 was $2,724, up 2.9% (or $76) year over year. May marked the third consecutive month in which year-over-year growth was over 2%. The credit card delinquency rate for May was 1.43%, 27 basis points lower than pre-pandemic May 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.