Industry News | January 10, 2013

December Sees Slump in Consumer Spending Growth

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First Data Corporation, a global leader in electronic commerce and payment processing, released its First Data SpendTrendanalysis for the full month of December 2012 compared to December 2011.

SpendTrend tracks same-store consumer spending by credit, signature debit, PIN debit, EBT, closed-loop prepaid cards, and checks at U.S. merchant locations.

Consumers stepped back from spending in December as the fiscal-cliff debate continued, lingering effects of Superstorm Sandy persisted, and the initially less aggressive retail discounting environment for most of the month dampened shopping.

Dollar volume growth was 4 percent, the lowest monthly growth in three years and a steep slowdown from the typical range between 6 and 10 percent.

Retail dollar volume and transaction growth slowed significantly from November, as shoppers reigned in discretionary spending in the face of financial uncertainty. Retail dollar volume growth and transaction growth both hit 12-month lows at 2.9 percent and 1.4 percent, respectively.

Most retail segments saw slower dollar volume growth compared to November.

Average ticket growth slipped to -0.5 percent as consumers spent cautiously. Retailers were more frugal with discounting strategies earlier in the month, which negatively impacted spending.

As this appeared to negatively impact sales, many retailers then reversed course and rolled out more discounts later in the month to entice consumers and put a dent in the sluggish shopping season.

“Consumer spending took a big step back as concerns related to the fiscal cliff and the initially frugal discounting strategies by retailers dampened holiday spending,” says Rikard Bandebo, vice president and economist, First Data.

“Looking forward, consumer spending growth may slow as new fiscal policy is enacted in January and consumers take a small hit from the end of the payroll tax holiday,” he says. “Fortunately, many consumer fundamentals are holding up well: Job growth is steady, gas prices are falling, the housing market continues to turn the corner, and equity prices have also held up.”

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