Consumer Payment Card News

Sideways Consumer Confidence Set to Shift

Sideways Consumer Confidence Set to Shift

The sideways consumer confidence will finally produce oodles of more certainty as the nearly $2 trillion “Really Big Stimulus” package quickly passes through the U.S. Congress. Furthermore, the “U.S. Federal Retail Pharmacy Program” is now shifting to high-gear as giants like Walmart, Walgreens, CVS and grocery store pharmacies are now receiving direct shipments of Covid vaccines. 

In January, consumer confidence was rattled by surging U.S. Covid death rates, in the wake of the Thanksgiving and Christmas holiday breaks, briefly topping 4,000 per day. Bottlenecks in the distribution of vaccines, bungled by the prior Administration, did not help.  Furthermore, the impact of the January insurgent attack on the U.S. Capital cannot be understated, notes Robert McKinley, Senior Analyst for CardWeb.

Consumer spending, representing more than two-thirds of the U.S. economy, continues to decline. Food insecurity and unemployment issues from the temporary expiration of government-funded benefits did not help. Spending in bars and restaurants continued to decline, about 5% monthly, while the only meaningful increases have been reported by grocery and building supply stores notes CardBuzz and CardTrak.

Credit Card Activity

While credit card debt on Visa, Mastercard, American Express and Discover has been declining this year, debit card usage is up remarkably, reports CardData and Bankcenter. Moreover, credit card usage is starting to rebound.   

Credit Card Networks U.S. GDV (gross dollar volume) for fourth-quarter credit/charge card products, among the Major 4 payment networks (Visa [V], Mastercard [MA], American Express [AXP], and Discover [DFS]), declined 6.4% year-on-year (YOY), compared to a 10.9% YOY nose-dive for the prior quarter, and a 7.4% YOY gain for the year ago quarter, based on data compiled by RAM Research and CardFlash.

Professor Cardworthy suggests the “Really Big Stimulus” package could easily become the economic vaccination the U.S. economy needs. Coupled with a claw-back of the unwarranted 2017 corporate and high personal income tax breaks the impact could be significant. With mandated masking, distancing and rapidly expanding vaccine injections, the Covid war, physically and economically could easily be destroyed in 2021.

National Consumer Confidence

The Conference Board Consumer Confidence Index ticked-up in January, after dipping slightly in the prior month. The Index now stands at 89.3, up from 87.1 in December. The percentage of consumers claiming business conditions are “good” increased from 15.4% to 15.8%, but those claiming business conditions are “bad” also increased, from 39.7%  to 42.8%. Consumers’ assessment of the labor market was equally glum. The percentage of consumers saying jobs are “plentiful” declined 40 bps (basis points) to 20.6%, while those claiming jobs are “hard to get” inched upward by 90 bps to 23.8%.

However, Americans have grown more optimistic about the short-term outlook. The percentage of consumers expecting business conditions will improve over the next six months increased from 29.5% to 33.7%, while those expecting business conditions will worsen decreased from 22.0% to 18.1% in January. Consumers’ optimism regarding the jobs market improved. The proportion expecting more jobs in the months ahead increased from 28.0% to 31.3%, while those anticipating fewer jobs decreased moderately from 22.2% to 21.4%. Regarding their short-term income prospects, the percentage of consumers expecting an increase declined from 15.7% to 14.4%, while the proportion expecting a decrease declined from 14.6% to 14.2%.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, notes the holiday resurgence of COVID-19 is the major suppressor.  Overall, consumers foresee conditions improving in the not-too-distant future. In addition, the percent of consumers who said they intend to purchase a home in the next six months improved, suggesting that the pace of home sales should remain robust in early 2021.

National Consumer Sentiment

Another major survey finds consumer sentiment remained unchanged during January. The overall stability of consumer confidence has benefitted from wearing masks and social distancing, the quick substitution of home for office work, and the prompt distribution of generous federal benefits.

The January Survey of Consumers, by the University of Michigan, reports its Index of Consumer Sentiment (overall) decreased slightly to 79.0 compared 80.7 for December, and compared to a 2020 average of 81.5. The Index of Current Economic Conditions declined 3.7% from the prior month and the Index of Consumer Expectations slipped 60 bps from December 2020 to 74.0.

Year-on-year (YOY) the Consumer Sentiment (overall) decreased 20.8% in January. The Index of Current Economic Conditions also dropped 24.2% YOY and the Index of Consumer Expectations is also sharply down 18.2% from January 2020.

University of Michigan Chief Economist Richard Curtin says although the nation is still being ravished by the pandemic, and the nation’s cooperative reactions have been far from perfect, consumers have helped to dissipate the potential for further harm. Despite continuing job and income disparities, as precautionary motives begin to ease, accumulated savings will spark a significant gain in spending in late 2021. 

In contrast to the reduced levels but relatively stable trends in consumers’ economic expectations, partisan views have remained quite volatile. In the past three months, the Index of Consumer Expectations, the primary gauge for the future performance of the economy, has jumped among Democrats to 91.8 in January from 68.6 in October, and among Republicans it has plunged to 51.4 in January from 96.4 in October. This reverses the shift which occurred when Trump was elected and maintained throughout his term in office.

Florida Consumer Sentiment

The University of Florida Consumer Sentiment Index increased among Floridians inched by 40 bps in January to 82.6 from December’s revised figure of 82.2. Among the five components that make up the index, three increased and two decreased.

Floridians’ opinions about current economic conditions were mixed. On one hand, perceptions of ones’ personal financial situation now compared with a year ago increased 4.7 points from 68.3 to 73, the greatest increase of any reading this month. Notably, this opinion is shared by all Floridians across different sociodemographic groups but are stronger among those with an annual income above $50,000.

On the other hand, opinions as to whether now is a good time to buy big-ticket items, such as refrigerators, cars, or furniture dropped 3.1 points from 78.5 to 75.4. Similarly, this opinion is shared by all Floridians, but in this case people aged 60 and over reported stronger pessimistic views.

Hector H. Sandoval, director of the Economic Analysis Program at UF’s Bureau of Economic and Business Research says despite January’s slightly positive change in consumer confidence, driven mainly by Floridians’ responses about their personal financial situation now compared with a year ago, outlooks about future economic conditions remained largely unchanged, thus anticipating a slow recovery ahead in 2021.

With an economy largely depending on tourism, particularly domestic tourists, a robust economic recovery for 2021 rests on the pace of vaccinations across the country. Looking ahead, given the current vaccination rollout, it is expected consumer confidence will improve slowly in the coming months.

Sources: CardData; RAM Research; CardTrak; CardFlash; Cardworthy; CardWeb; PYRPTS; CardBuzz; Bankcenter; PYVNTS; Ruebud Media; Red3 Media; Robear’s List