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Show Me the Credit!

Credit Card companies continue to project big revenues and despite record high inflation

the current spending behaviors of customers don’t suggest an economic downturn is

imminent. AMEX, VISA and Mastercard have all seen growth in spending. A rebound in

travel and entertainment spending, as well as sustained growth in goods and services

spending have shown no slow down. Compared to the second quarter of 2019, travel and

entertainment spending doubled. Spending by Gen Z and millennial cardholders jumped

48% year-over-year “significantly outpacing” other generations.

Consumers are absorbing record-high inflation that has driven up the prices for essential

goods as well as luxury items and travel. In a recent report by Mastercard’s SpendingPulse

survey, retail spending in June, excluding automotive, rose 9.5% on a year-over-year basis,

as consumers spent more on necessities such as food and fuel. Excluding auto and gas,

sales jumped 6.1%.

In-store spending in June rose 11.7% over last year while e-commerce sales grew at a

slower 1.1% pace, excluding auto and gas expenditures, according to Mastercard.

Nonetheless, e-commerce spending last month was still about double its June 2019 level.

Meanwhile, consumer prices have been moving up. The Consumer Price Index surged

8.6% during the 12-month period ending in May, according to a release from the Bureau of

Labor Statistics last month. That’s the biggest increase in the closely followed metric since

December 1981.

Inflation is at record highs, but so far the demand for both essential and non-essential

goods and services has not slowed down. With an increase in credit card spending, and

more debt, will delinquencies in payments increase? So far credit card companies have

not seen an increase in deliquencies and write offs, but expected those numbers to

increase at a normal rate comparable to pre-pandemic, pre-inflation years.

* Source: Mastercard’s SpendingPulse, Bureau of Labor Statistics, Payments Dive

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