Fed Gets Its Wish: Real-Time Card Data Shows Consumer Spending Craters After Start Of Bank Crisis

Fed Gets Its Wish: Real-Time Card Data Shows Consumer Spending Craters After Start Of Bank Crisis

Regular readers are aware that over the years we have become big fans of real-time card (both credit and debit) spending data as tracked by one of the largest US banks, Bank of America, which makes “big data” observations on its massive card portfolio available to clients. After all, it was Bank of America’s card data that allowed us to correctly predict that the February retail sales would be blowout (if one-time) number, multiples higher than consensus…

… and just days later, to also predict that the subsequent, February retail sales number would see a dramatic slump now that the bevy of one-time stimulus benefits had passed. We were right again.

This matters, because now that the Fed has effectively capitulated its tightening campaign by handing over the disinflationary responsibilities to the ongoing bank crisis – with Jerome Powell explicitly saying in the latest FOMC statement that “recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation”, getting the latest card data has become absolutely paramount as it would demonstrate whether Powell’s hypothesis is accurate, and if so, it would justify the Fed’s de facto end of its tightening campaign (and imminent rate cuts and then QE).

Unfortunately, there is still no update from Bank of America on its latest card spending data… but yesterday Citi – the world’s largest credit card issuer globally – was kind enough to release its own credit card data and boy, is it a doozy.

As Citi’s Paul Lejuez writes in the latest “Citi’s Credit Card Insights” report (available to professional subs), the bank’s credit card data for the 16 sub-sectors it tracks show that total spending in March wk 3 (ended 3/18/23) decreased 10.3%, a big deceleration vs March wk 2 (-6.8%), and driven by a high-single digit decline in transactions. Ex-Food, spending decreased even more, tumbling by 13.0% vs -8.1% in March wk 2.

As Lejuez notes, “This was the first week of data following the disruption within the financial sector, and we were curious if it might have had an impact on the consumer. It sure did” and as Citi goes on to note, the third week of March, and the first week after America’s regional banks imploded, was the biggest decline in total retail spending we have seen since the pandemic began (April 2020).”

In total, March is off to a much slower pace than Feb (-8.3% MTD vs Feb -6.0%), with Citi seeing broad based deceleration across sectors with only one sector (Jewelry) accelerating. And that was probably to buy gold as a hard asset to diversify away from the dollar.

Here, some call-outs:

  • (1) Household Items remain weak with Appliances, Home Furnishings, and Electronics all down double digits,
  • (2) Jewelry saw a big acceleration and was the second strongest performing sector (in absolute terms) in March wk 3. Jewelry has been very volatile over the past several weeks;
  • (3) Cosmetics still topped the charts of absolute performance YoY (+8.0%), though the category is now well below the +30-40% trend we saw in Dec and Jan.

Turning to the chart below which shows sub-sector acceleration/deceleration in March wk 3 vs March wk 2, we find that in March week 3 compared to March week 2, we saw an acceleration only in Jewelry. We saw a deceleration in Home Improvement, Footwear/Shoe Stores, Electronics, Cosmetics Stores, Home Furnishings, Mass/Dollar/Off-price, Eyewear/Optometry, Aftermarket Auto Parts/Service, Apparel, Pet Shops, Dept Stores, and Sporting Goods Stores.

And a few words on the methodology (more in the full note available to pro subs):

Citi is the world’s largest credit card issuer globally, and in conjunction with our Innovation Lab colleagues, we look at credit card data for many different sub-sectors of retail. Though we cannot see individual retailer transactions (due to legal limitations), we believe looking at the data at a sub-sector level is helpful to assess industry and overall spending trends as a part of building an investment mosaic.

It sure is helpful, and what it shows is that if the Fed indeed was secretly hoping to have a contained bank failure “crisis” (it remains to be seen if the crisis can and will be contained) in order to hammer the primary pillar of US growth – consumer spending which accounts for 70% of GDP – and thus, latent reflationary forces, it has finally succeeded and the only thing that can avert a crushing recession or worse in the coming months, is for the Fed and Congress to finally realize that any hope of a normalization of the US boom-bubble-bust cycle is dead and buried, and the best officials can do is kick the can, buy the US a few more quarters and unleash the stimmies once again, both monetary and fiscal.

Because when you are in the endgame, you might as well admit you are in the endgame and at least extend your existence for a few more days.

Much more in the full citi note available to pro subs.

Tyler Durden
Thu, 03/23/2023 – 21:42
Source: Zero Hedge News

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