Visa and Equifax Answer Your Consumer Spending Questions

As you think about your business plans in 2022, having access to key data to make informed business decisions will be important. For our January 20 Market Pulse webinar, our panel of experts discussed the Spending Momentum Index by Visa, as well as, the latest small business insights, and consumer credit trends.

This month’s presenters included Wayne Best, Chief Economist at Visa; Sarah Briscoe, Lead Commercial Statistical Analyst at Equifax; and Tom Aliff, Risk Consulting Leader at Equifax.

Presenters followed up with audience members’ questions* about consumer spending, inflation, delinquency trends, and more. Wayne Best, Sarah Briscoe, and Tom Aliff answer those critical questions below. 

Watch a replay of our webinar, “Market Pulse: Planning the Future from Today’s Consumer Spending ” or download a copy of the presentation.

Are you able to separate brick and mortar spending from online spending?

Wayne Best: The data available publicly includes the headline number as well as discretionary and nondiscretionary spending. The data is more available to clients. We are planning on a new release that will have more demographic splits, etc. There is a lot of interest when it comes to income, age, and other splits like that, that compile robust types of conclusions. 

How much of these levels could be correlated to inflation? 

Wayne Best: We absolutely adjust for inflation. These levels are adjusted and when looking at the change of spending year-over-year for cardholders we factor in inflation. This is an attempt to look at the changes of consumer spending without those inflationary aspects. 

Does your index include travel spending?

Wayne Best: It includes all spending. It is not just a goods related metric. The biggest secret when it comes to what is available when it comes to datasets is generally just retail sales. We include any kind of service related expenditures. 

As per the MBA 1/18/22 forbearance survey, there are about 705K mortgage loans in forbearance, so the total has dropped to about 1.41%. How do the panelists see this impacting the Mortgage Industry, if at all?
Tom Aliff: From our perspective we have been closely monitoring those people in that status. We found that the forbearance on mortgage delinquencies were reduced during that time period.

As mortgages have been rolling off these accommodation statuses, they have had a high delinquency level; however, many consumers placed in those statuses have had recovery. The delinquency rate is about two times higher than traditional aspects. We are starting to level back down to the total number of mortgages that are in those origination statuses. At a portfolio level, mortgage as a whole has had the largest dollar amounts. But at an overall portfolio level it has been reduced quite a bit. 

Does the credit migration data you shared suggest credit score inflation? What's driving this? Is it the extra money from pandemic assistance or paydowns? Do we expect it to continue?

 
Tom Aliff: There are a few things driving this in particular. When we consider major drivers, delinquency is one of the major drivers of score reduction, utilization, and balances that impact scores as a whole.

However, scores have risen while delinquency was on a decline. During this time we saw a 40 point increase on average for those consumers that sit within subprime and lower levels. We have seen scores stay consistent and I think since scores can decline, I would continue to monitor both scores and trended data to see what kind of velocity or slope you can see across balances, utilizations, and delinquencies on and off your portfolio. 

With increases in spending coupled with inflation, when do you expect delinquency and bankruptcy trends to normalize to more pre-pandemic levels?

Wayne Best: We are going to start seeing delinquency and bankruptcy trends normalize in the March to April timeframe. Up to this period of time we have had a tremendous amount of stimulus and other income flows that have boosted a large amount of available income to consumers during the pandemic. Now it is starting to shift. Those programs have dried up with the expansion of the economy. We will start to see more of that normalization in the next few months of 2022. 

Do you have insights on delinquency trends on start-up small businesses?

Sarah Briscoe: Extremely small, brand-new businesses are being tied to consumer data. They are taking on more debt on their consumer credit. You can expect to see these trends showing up a little more in the consumer business owner trend. Although they are included in the SBLI [Small Business Lending Index] and are going to follow more in the consumer trends. 

Are you expecting higher rates to affect the SBLI? If so, any idea when?

Sarah Briscoe: We are expecting some slow growth with the SBLI. We have seen through 2021 record levels with stimulus. We are though in 2022 expecting some slowdown in terms of data growth. It can’t keep going in terms of lending activity. 

Click here to watch the January Market Pulse webinar for more on consumer spending trends. 
Access additional related insights here and register for upcoming webinars here.

 

* The opinions, estimates and forecasts presented herein are for general information use only. This material is based upon information that we consider to be reliable, but we do not represent that it is accurate or complete. No person should consider distribution of this material as making any representation or warranty with respect to such material and should not rely upon it as such. Equifax does not assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice. The opinions, estimates, forecasts, and other views published herein represent the views of the presenters as of the date indicated and do not necessarily represent the views of Equifax or its management.