Tuesday, December 26, 2023

Inflation did little to dampen consumer holiday spending, data finds

New data from Mastercard indicates that a strong job market helped consumer spending during the holiday season.


Mark Lennihan/AP

By Justin Boggs
 Dec 26, 2023

New data from Mastercard showed consumer spending largely kept up with inflation during the holidays.

According to Mastercard, consumer spending grew 3.1% during the 2023 holiday season compared to the same time in 2022. Spending at restaurants jumped 7.8%, while expenditures on apparel grew 2.4% and grocery spending increased 2.1%. Electronic spending had a 0.4% drop during this holiday season, while jewelry expenditures declined by 2%.

The data largely reflected changes in inflation. According to the latest consumer price index, inflation rose 3.1% for the 12-month period ending in November. Food consumed away from home increased 5.3% in the last year, while food at home jumped 3.3%.

Apparel costs rose 1.1% in the last year. Jewelry prices increased by 2%, while video and audio products decreased by 5.5%, according to the consumer price index.

Mastercard indicated it was another strong holiday season for retailers as the U.S. maintained an unemployment rate below 4% since January.

"This holiday season, the consumer showed up, spending in a deliberate manner," said Michelle Meyer, chief economist with the Mastercard Economics Institute, in a press release. "The economic backdrop remains favorable with healthy job creation and easing inflation pressures, empowering consumers to seek the goods and experiences they value most."

A new U.S. Department of Commerce report shows consumer prices are down slightly, suggesting inflation is cooling.LEARN MORE

The data also was particularly strong for online commerce. Retail spending online increased 6.3%, while in-person spending went up a mere 2.2%.

Experts say retailers began offering holiday-related sales earlier this year, helping revenue this holiday season.

"Retailers started promotions early this season, giving consumers time to hunt for the best deals and promotions," Steve Sadove, senior adviser for Mastercard, said in a press release. "Ultimately it was about getting the most bang for your buck as consumers spent on a variety of goods and services, resurfacing spending trends from before the pandemic."

Retailers could still see a lot of traffic in the coming days. According to Sensormatic Solutions, two of the top 10 shopping days of the year will come during the week between Christmas and New Year's Day. Tuesday is expected to be the sixth-busiest shopping day of the year, while Saturday is projected to be the eighth-biggest day for shopping in 2023.


What's behind America's record-breaking credit card debt?

Total credit card debt in the U.S. passed $1 trillion this year and is continuing to climb and break 



By Lauren Magarino
 Dec 24, 2023

Inflation is cooling, but during its peak in 2023, American consumers continued to spend, with many opting to pay with credit cards.

Recent data reveals that Americans are increasingly accruing higher levels of credit card debt, reaching a record-breaking peak.

“I think the U.S. consumer is walking towards a cliff, basically. They're running out of cash; they feel a bit excess things; they've been run down quite hard,” Chris Watling, CEO at Longview Economics, told CNBC News.

According to Paulina Likos of CNBC Business News, due to increased borrowing costs, some Americans are falling behind on their credit card payments as their household budgets are being squeezed.

The Federal Reserve Bank of New York's third quarter report says credit card balances in the U.S. hit a record high of $1.08 trillion.

For comparison, it reached about one trillion during the great recession in 2008, and 2023 has also seen a record high jump of $154 billion compared to the year before.

Credit card debt is still below student loan debt, but the damage is still far-reaching and growing.

Credit card APRs have gone up 30% over the last year and a half. That's the yearly interest rate consumers will pay if they carry some balance on the card.

Through December 2023, the APR for a new credit card was at nearly 23%, and households are increasingly becoming delinquent on their credit cards, meaning they are at least 90 days overdue on payments.

The rate of becoming delinquent on a credit card date reached its highest since the end of 2011.

“72% of Americans plan to increase their discretionary spending when they get a raise if you're saddled with credit card debt, if you're saddled with student loan debt, if you're having to, you know, pay more a month in bills, that could ultimately impact your lack of financial security too,” said Sarah Foster, a Bankrate analyst.

The amount of debt owed on a credit card and your ability to pay it are two of the biggest factors impacting a person's credit score.

There can be many reasons that factor into the rising dependence on using credit to make payments.

Digitized spending and e-commerce make it easier to spend than ever. And in a tough economy, paying with credit can often be a lifeline for households that can't afford to pay for something immediately.


But it can be hard for many consumers to track how much money is actually being spent, especially as they navigate through fees for things like minimum payment requirements or changing APRs.

According to a survey by the financial management service Quicken, a little over a third of respondents said they expect to max out on at least one credit card by the end of the year.

Nearly 40% are living paycheck to paycheck and say they don't see a way to pay off the debt at all.

There are some services to help consumers climb out of the credit card debt hole, even those facing multiple delinquencies and maxed-out cards.

Non-profit debt management companies can help consumers navigate their options. One major one is consolidating multiple debts into a manageable monthly payment.

"My debt management payment right now is a single monthly payment of $1,031,” said Matt Solomon, who used a debt management service. "I don't have to worry about, you know, when is this credit card due? When is this due? And it just feels—it's such an accomplishment."

Other experts stress taking control of budgets before the credit gets out of hand, recommending consumers try to limit their spending with credit cards more carefully.

"Just writing it out, making sure that you can visually see your debt and truly show what that looks like as opposed to 'I think I owe this and I think I owe that' that actually adds more stress to everything,” said Rocio Smith, Market President for Achieva Credit Union in Hillsborough County.

Making the money you spend but can't see a realistic threat to financial freedom.




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