By: Brian Scott, SVP and Chief Growth Officer, Primax
The extended 2021 holiday shopping season (October through December) saw strong consumer purchasing, even with a substantial surge of COVID-19 cases due to the Omicron variant. As shared in our Primax Payments Pulse: 2021 Holiday Spending Report, the strongest share of weekly purchases – similar to previous years – was during the four weeks beginning with Thanksgiving week. Despite pandemic-related challenges and supply chain difficulties, consumer spending remained solid, and many resumed in-person holiday shopping.
The special edition report also showed that growth in purchases outpaced growth in transactions, while growth in Card Present (CP) activity outpaced growth in Card Not Present (CNP) compared to the same quarter in 2020. Notably, the 2021 holiday shopping period saw consumers reverting to more typical levels of credit card usage, reversing the trend from the prior two years in which more transactions were processed on debit cards.
Key takeaways from our 2021 Holiday Spending Report included:
- Credit card usage continues to rise. Consumer spending was very strong for both credit and debit purchases in the fourth quarter, with growth in credit continuing to outpace debit. Credit purchases were up 24% and debit purchases were up 17% compared to the same period in 2020. For credit purchases in the fourth quarter of 2021, all sectors reported growth above 2020 levels. Compared to 2020 Q4 results, Entertainment and Travel credit purchases were up 119% and 112%, respectively. Transactions grew at a slower rate than purchases, providing a slight improvement to average purchase sizes.
- Growth in our same-store population of financial institutions outpaced market predictions, with purchases in the Goods sector up 13.7% for credit and 11.8% for debit over the cumulative three-month holiday season. The strongest period for purchases remained Thanksgiving week through the week before Christmas. Consumers resumed in-person holiday shopping, with Goods sector Card Present (CP) credit purchases up 20.9% and CP debit purchases up 12.4% compared to 2020.
- The CPI-U for December increased to 7.0%, the largest yearly increase since June 1982. The “core” PCE (Personal Consumption Expenditures) price index, which excludes food and energy prices due to their volatility, rose to 5.5% in December – the largest 12-month increase since February 1991. The Federal Reserve is wrapping up its large-scale bond repurchase program by spring and hinted that interest rate changes could come as early as March to curb the high inflation.
- Workers remained in short supply as many retailers paid premiums for seasonal holiday staff. The unemployment rate fell to its lowest point since the onset of the COVID-19 pandemic, registering at 3.9% in December with 199,000 jobs created. Prior to the pandemic in February 2020, the unemployment rate was 3.5% with 5.7 million unemployed. Sourcing employees remains a top concern.
Looking Ahead
Almost two years into the COVID-19 pandemic, consumers are growing increasingly weary and yearn for a return to some sort of “normal,” and this sentiment is reflected in spending habits. As consumer preferences and behaviors continue to shift and evolve, Primax will continue to deliver timely, relevant insights into consumer spending trends. We hope that these insights will help our financial institutions continue to make informed decisions as we journey through 2022.
Brian Scott partners with industry leaders in payments and community financial institutions to create competitive payments programs, helping financial institutions position themselves competitively in their own communities and maintain profitability throughout their payments programs. Brian spent 23 years in the highly competitive consumer payments marketplace and is a recognized leader in payments solutions and innovative technologies. He is a frequent speaker on the future of payments, new payments trends, mobile banking, alternative payments, and how new payments technologies will transform the current banking space.
