If consumer purchasing is the lifeblood of payments, you have to consider their confidence in the economy. Right now, it does not seem so good.
The University of Michigan’s Consumer Sentiment Index, developed in the 1940s, is a go-to resource for getting a pulsebeat on the general economy and consumer perspectives. This CNBC article indicates that consumers are concerned. This trend is essential for credit card managers to watch because there can be a down-field issue with holiday spending during Q421.
- A key consumer sentiment reading saw a dramatic drop in early August as the delta variant of Covid-19 increased fears about the path of the economy, the University of Michigan said Friday.
- The consumer sentiment index tumbled to 70.2 in its preliminary August reading. That is down more than 13% from July’s result of 81.2 and below the April 2020 mark of 71.8 that was the lowest of the pandemic era.
- It was the lowest reading for the measure since 2011. Economists surveyed by Dow Jones were expecting a reading of 81.3 for August.
Card issuers and payment networks faced a similar challenge when COVID hit in March 2020, so the second bullet point is of particular interest. Consumer sentiment in August is now worse than it was during COVID-1.
Historical data is available at the University of Michigan website.
The Conference Board, which also publishes a respected view of consumer confidence, indicates a similar issue, as Reuters notes.
- U.S. consumer confidence fell to a six-month low in August as worries about soaring COVID-19 infections and higher inflation dimmed the outlook for the economy.
- The survey from the Conference Board on Tuesday showed consumers less inclined to buy a home and big-ticket items like motor vehicles and major household appliances over the next six months, supporting the view that consumer spending will cool in the third quarter after two straight quarters of robust growth.
Why Worry?
Black Friday is about 12 weeks away. According to ABC News:
- U.S. consumers spent $6.3 million per minute shopping online on Black Friday or $27.50 on average per person. $3.6 billion was spent via smartphones, a 25.3% increase year over year, reaching 40% of the total online spend.
- In-store and curbside pickup increased 52% on Black Friday year over year, as many consumers looked to avoid in-store shopping.
- Leading into Small Business Saturday, smaller retailers saw early success with sales 545% higher on Black Friday, compared to an average day last month, and a 211% boost in sales this past week compared to October.
Decrease sales mean less 2021 interchange and less interest from revolving debt, which will impact 2022 revenue.
