RANCHO-CUCAMONGA, Calif.—As expected, January spending fell following a strong holiday shopping season, but a strengthening economy is helping to boost consumer confidence in the new year, Co-op Solutions reported.
Overall, Co-op Solutions said its credit union portfolio data shows that January transaction volume rose by 5.5% in Credit and 1.7% in Debit on a rolling 12-month basis, while month over month volumes were down by -8.8% and -11.1%, respectively.
Trends Being Watched
Meanwhile, Co-op said its SmartGrowth Team is watching the following key spending trends this month:
Monthly Transaction Volume Falls Due to Seasonal Factors
Co-op noted that January typically shows declines in both debit and credit volume, as online and in-store traffic slows down following the busiest shopping season of the year.
In addition, consumers tend to use the gift cards they received over the holidays for discretionary spending in the first quarter of the year – activity that doesn’t show up in credit and debit transaction volume reports, Co-op said.
“In accordance with this historical trend, January 2024 credit transaction volume fell by -8.8%, and debit dropped by -11.1% from December 2023,” Co-op said.
Although overall results were down, double-digit increases were seen in the Campers & Camping (up 39.3% in credit and 18.1% in debit) and Education (up 24.2% in credit and 18.6% in debit) merchant categories. Although the overall Travel category was flat for the month, Cruise volume showed strong month over month growth (26.9% on credit and 13.6% on debit), Co-op said.
Credit Outpaces Debit Year Over Year
Co-op said its data show that on a rolling 12-month basis, credit transaction volume was up 5.5% in January. Comparing January 2024 to January 2023 the lift was even larger, with credit transaction volume up 8.4% for the month.
In contrast, debit transaction volume remained flat with a 1.7% increase on a 12-month rolling basis, and just an 0.8% lift over January 2023.
“Despite the improving economic outlook, consumer households are feeling cash-strapped,” said Ryan Prentice, director, SmartGrowth Consulting Services. “A combination of factors has impacted their financial wellness over this past year, including rising inflation and interest rates, coupled with the depletion of their savings from pandemic-era government incentives. This is driving members to use Credit for more non-discretionary purchases, and even for everyday spending.”
Digital Goods Show Big Gains
“Digital goods have proven to be one of the biggest success stories of the past year. This category, which is comprised of products sold in digital form, such as musical albums or songs, movies, eBooks, apps and games, showed strong year-over-year growth in both credit and debit, Co-op said.
According to Co-op client portfolio data, the overall Digital Goods merchant category rose 24.1% in credit and 19.9% in debit on a rolling 12-month basis.
“Interestingly, the subcategory of Books, Movies and Music showed a sharp decline across both portfolios, perhaps signaling that consumers are growing more comfortable consuming these forms of entertainment and media either through subscription streaming services (which are not included in Digital Goods), or in the theater and at live venues,” the analysis added.
Continued Migration
“These results show that members are continuing to migrate toward the digital realm for many of their needs,” said John Patton, Co-op senior payments advisor. “Whether its apps, games or digital marketplaces, the consumer loves the convenience of their mobile device, and this category is only going to continue to grow.”
Year-Over-Year Category Level Spending (Rolling Year Average, and Comparing January 2023 to January 2024)
More information on the Co-op SmartGrowth Team can be found here.
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