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5 SPENDING PREDICTIONS FOR THIS FALL 

General, Payment Trends, Predictions


5 SPENDING PREDICTIONS FOR THIS FALL 

Co-op Solutions
August 29, 2022
 2  0  6  13  3


As the summer winds down, the state of the economy weighs on the minds of many. 

But the news is not all bad as some measures of economic health have shown
improvement in recent weeks. The inflation rate hovered near four-decade highs
in July, but decelerated slightly as energy and gas prices fell. Signs that
inflation may finally be softening led U.S. consumer sentiment to rise in early
August, continuing a slow recovery from record lows earlier this summer. 

The job market remained the most resilient corner of the economy, as non-farm
payrolls rose by a robust 528,000 in July, easily outpacing consensus estimates
and dropping the unemployment rate to 3.5%. But concerns remain of a looming
shift from high-paying to low-wage jobs as a broad selection of major employers
including Ford, Wayfair, Peloton, Best Buy, and Walmart have all recently
announced their intentions cut staff. According to PwC, half of all companies
plan to reduce headcount over the next six to 12 months. 

To help your credit union plan ahead for a busy fall season, here are 5 payment
predictions from Co-op’s SmartGrowth experts: 

 1. Back-to-school season will be extended: Back-to-school is the second largest
    shopping season of the year, behind only the Winter Holidays in importance
    to retailers. That’s one reason why merchants are hoping for a particularly
    strong back-to-school season, as high inflation and ongoing recession fears
    could cause consumers to tighten their pocketbooks later this year. 
    
    These same economic drivers may propel an extended back-to-school shopping
    period this year. According to a recent survey of over 2,000 U.S. parents,
    only 36% said they could afford back-to-school shopping for their children,
    down from 52% last year. And 37% are feeling stressed about being able to
    afford these purchases—up from 32% last year. 
    
    These stressors are likely to help extend school-related purchases over a
    longer time period. The combined impacts of high inflation and the end of
    the pandemic stimulus check program means parents have less discretionary
    income to spend this year versus last. Cash-strapped parents will focus on
    buying only what is necessary to get their kids started in the classroom
    now—critical items like supplies and books, rather new clothes and
    shoes—while deferring discretionary purchases for later on in the fall. 
    
    According to Beth Phillips, Managing Director, Strategic Portfolio Growth at
    Co-op, this year’s back-to-school season is starting to show some “Black
    Friday behaviors.”  
    
    “It’s proved difficult to get some school supplies as well,” Phillips says.
    “From production issues causing dixie cup shortages to a race to obtain
    name-brand items requested by schools, last-minute shoppers experienced
    shortages and delayed delivery on certain items students need for the
    classroom.” 

 2. More choose to dine out as the economical choice: One beneficiary of the
    rise of the budget-minded consumer is discount retailers like Dollar General
    and Dollar Tree. For example, average spend on grocery items at this type of
    discount store grew by more than 70% over the nine-month period ending in
    June 2022. 
    
    The same study found that grocery store spending fell by 5% between October
    2021 and June 2021, spurred by rising prices on staple goods. Inflationary
    pressures are causing the highest inflationary gap between grocery stores
    and restaurants in decades, driving more consumers to dine out at fast-food
    and fast casual restaurant outlets, as these meals become comparative
    bargains for price-sensitive heads of households. 
    
    Combined with a pandemic-weary public’s desire to get out of the home and
    enjoy social experiences like sit-down restaurants and entertainment,
    Co-op’s experts anticipate the strong growth in restaurant dining to
    continue through the rest of the year and into 2023. 

 3. Holidays will come early this year: While back-to-school shopping will be
    extended, Co-op’s SmartGrowth experts are also predicting an early holiday
    shopping season this year. 
    
    “Retailers are pushing their holiday sales up sooner in the shopping cycle,
    hoping to catch early shoppers eager to capture good deals,” Phillips says.
    “To prepare, major brick and mortar retailers are ramping up their delivery,
    pick up, and in-store service offerings to compete with Amazon and other
    online-only merchants.” 
    
    Meanwhile, let’s not forget about online shopping and digital services,
    which our experts forecast for continued, steady growth. 
    
    “Sales of digital goods will continue to soar right through the holidays,
    highlighting the need for credit unions to fully digitize their offerings,”
    Phillips says. 

 4. Travel spending to increase: Travel has already had a strong bounce-back
    year in 2022, despite high fuel prices and overall inflationary pressures.
    According to the U.S. Travel Association, the combination of post-COVID pent
    up demand and consumer savings will provide for continued strong growth
    through 2022, with slower positive growth in 2023 in both the leisure and
    business travel sectors. The organization projects total travel expenditures
    of $1.05 trillion for all of 2022, rising to $1.15 trillion in 2023, which
    would represent 96% of pre-pandemic spend in the sector. 

 5. Credit card balances will continue to rise: As inflation stays hot and more
    consumers worry about impending recession, those with access to savings will
    hoard their cash, taking on more debt to pay for household goods and
    services. 
    
    Unfortunately, not everyone has savings, and many are living from paycheck
    to paycheck. Recent surveys show that the percentage of Americans who are
    able to cover a $400 emergency expense has fallen from a high of 68% in
    November 2021 (when pandemic checks were still rolling in), to as low as 51%
    in May 2022. As consumers deplete their cash reserves, they will be forced
    to borrow on credit to cover monthly bills and non-discretionary expenses
    like gas and groceries. 
    
    This is a major reason why Co-op’s credit union client credit portfolio
    balance data has been showing steady growth each month since late 2021,
    reaching a year-over-year growth rate of nearly 10% in June. 

What CUs should do to prepare: 

 * Promote your Credit Union’s “every day” benefits 
   
   Begin implementing your holiday season communications plan now, and make sure
   to shout it from the rooftops.  
   
   Keep your key messaging clear and concise, and focused on your card products’
   competitive differentiators—low everyday rates and minimal fees. Let
   consumers know that you developed your credit card products with your members
   in mind. While other credit cards may distract members from their high annual
   percentage rates (that are rising at record speed) by offering attractive
   short-term rewards, your card products alone can save your members money
   every day. Per NCUA, average credit union credit card APRs are just 11.32%,
   compared with a national average of 19.61%, according to a July Nerd Wallet
   article.  
   
   Credit Unions must promote their overall service offering to members and
   non-members alike to push their cards top of wallet during holiday spend and
   beyond. 
   
   As the table below illustrates, by choosing a Credit Union, whose average
   interest rate is 11.32%, a member can pay off an average balance of $3,000
   with their credit union credit card, seven months sooner and save over $614. 

2022 Average Interest Rate (APR) Average Credit Card Balance Monthly
Payment 2022 Average Interest Rate (APR) Months to Pay Off Debt Total Interest
Paid Industry 19.61% $3,000  $100  19.61% 42 $1,157  Credit Unions
11.32% $3,000  $100  11.32% 35 $543  7$614

 * Use key merchant categories to incentivize holiday spend 
   
   As you navigate this period of economic uncertainty, it’s a great time to
   activate your credit card rewards program, and offer special rewards to
   incent members to use your card at popular merchants, like discount stores,
   restaurants, airlines and hotels, that will member behaviors during this
   critical time of year.  
   
   Don’t forget to analyze your cardholder data to create targeted campaigns
   before and during the holidays to specific segments that may need a nudge to
   move your card top of wallet – or those that are top spenders who can
   generate additional interchange.  

 * Anticipate member need for balance transfer promotions to assist with
   post-holiday spend heartburn 
   
   To help those members that are struggling with growing credit card debt on
   high-balance cards, offer low introductory rate balance transfers. This will
   both reduce their overall cost of credit, and encourage cardholders to
   maintain their primary financial relationship with your credit union. 

Optimize Your Portfolio with Co-op SmartGrowth: 

Fall is on the way, and it’s best to be prepared. Co-op SmartGrowth Consultants
can help you maximize returns on your credit and debit portfolios. Discover how
Co-op SmartGrowth can help you see beyond basic transaction data, analyzing your
card portfolio to reveal new opportunities for growth. Contact us to learn
more. 


RELATED POSTS:

 * 2021 Holiday Spending Predictions: Prepare Now for…
 * Fall 2021 Spending Predictions
 * 5 Consumer Spending Predictions this Spring 



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