Consumer Spending Slows As Inflation Rises

With inflation hitting another new high, consumer spending is showing signs of slowing down. The latest Tally Credit Card Spending Index found that the only spending categories to experience double-digit month-over-month gains in April were:

• Retail (up 13.2%)

• Home improvement (up 12.9%) 

• Groceries (up 11.3%)

Meanwhile, travel grew just 4.0% month-over-month in April. This is a notable slow down from jumping 20.7% month-over-month in March.

Clothing purchases bump up ahead of summer travel

Retail purchases for electronics, clothing and other goods have been on the decline since last year — aside from seasonal bumps during the holidays. In April, retail spending rose 13.2% month-over-month — more than any other category. As a total share of spend, retail made up 18.7% of all credit card purchases in April. This was largely driven by clothing purchases which rose 24.2% month over month. By comparison, electronics purchases only grew 8.5% month-over-month. These increases were likely driven by a demand for wardrobe refreshes ahead of summer travel.

Tis the season for home improvement

Home improvement projects often start in the spring as the weather starts to warm up. Spending on home improvement, including purchases at hardware and furniture stores, rose 12.9% month-over-month in April. However, spending is still nowhere near the levels seen during the height of the pandemic. 

Home improvement made up just 3.7% of total credit card purchases in April. By comparison, spending in this category peaked at 6.4% in May 2020 and stayed well above 4% through most of 2020.

Higher costs likely inflating grocery spending

In April, groceries made up 10.4% of total credit card spending, rising 11.3% from a month ago. Spending on food and related supplies has been elevated for the last two years. 

At the start of the pandemic, the share of spend on groceries jumped from 8.8% in February 2020 to 12.8% in March 2020. However, the reason for spending more on groceries has shifted. In 2020, the jump in spend was largely driven by consumers trying to build up their stockpiles ahead of shelter-in-place orders. Now, this “jump” is actually a reflection of higher prices. People are buying less but spending more. 

With summer vacations booked, travel spending slows

After the rush to book summer vacations, credit card spending on airlines, hotels and vacation vendors have slowed. Travel spending rose just 4.0% month-over-month in April — a notable slowdown after rising 20.7% month-over-month in March. As a total share of spend, travel made up just 8.4% of total credit card purchases. 

Tracking the spending habits of Americans carrying credit card debt since January 2019, the Tally Credit Card Spending Index ranks the share of dollars spent using credit cards each month at retailers and merchants in categories, including entertainment, groceries, personal care and fitness, shopping, restaurants and travel.

Methodology 

The Tally Credit Card Spending Index ranks the share of purchases made each month in several categories: entertainment, groceries, home improvement, personal care and fitness, pets, restaurants, shopping (includes electronics and clothing), travel, transportation and other. The “other” category includes unspecified transactions and categories that are too small to be ranked separately.

Each monthly index is based on a statistically significant sampling of approximately 200,000 anonymized credit card transactions in a given month made by Tally members, many of whom carry credit card debt. The index has been tracking credit card transactions since January 2019. All historical transaction data has been normalized to the most current month.

Share of the spend measures the proportion of total dollars spent in each category relative to total credit card expenses within a month. Percentage changes are calculated using the total dollar amount spent in each category on a month-over-month, quarter-over-quarter and year-over-year basis.