Amid high inflation and interest rates, consumers held back spending during the month of October, per the National Retail Federation (NRF) and CNBC who teamed up to launch a new retail sales tracker, The CNBC/NRF Retail Monitor.
By leveraging real-time debit and credit card purchase data from Affinity Solutions’, both companies are measuring monthly retail sales to gauge how the retail sector is performing.
Affinity Solutions has data on 140 million credit and debit cards, with almost 9 billion transactions valued at over $500 billion in yearly spending.
Total retail sales in October—excluding automobile and gas—dipped .08% from September and increased 2.57% year-over-year. This contrasted with September, when sales grew by 0.23% month-over-month, increasing 4.93% year-over-year.
What Lower Spending Means for Credit Card Companies
As a result of the various degrees of inflation, U.S. consumers have been more cautious when it comes to borrowing and spending. As CNN reported, October retail sales dipped for the first time in seven months, indicating the very restraint consumers are taking to not spend beyond their means.
Although the rest of the year can’t be predicted based on the performance of a single month, economists believe that the economy will continue to slow down the remainder of Q4, with hopes that inflation will taper off.
What does this mean for credit card issuers and the bottom line? Although credit card spend will decelerate as consumers are already struggling with mounting debt, the upshot is that credit card issuers can be shielded from credit risk. As more consumers exercise restraint in their overall spending, they are less likely to charge more than they can reasonably pay back.
This is good news for credit card issuers as this can potentially reduce incidences of chargeoffs that can also devastate their bottom line.
