For Immediate Release
Citi Australia
Citi Australia Monthly Credit Card Index - October
HIGHLIGHTS
Spending picks up as consumers get ready for Holiday season, but Covid-19 may have changed some consumer behaviour for the long-term
Highlighted Findings:
- Spend for October is estimated to be 3% higher than September. This builds on an increase in spend for the previous month. In September, spend was estimated to be 5.6% higher than August, with daily average spend increasing by 9%.
- Supermarkets, Household Goods and Business Services remain the top merchant categories, at 26% of total spend.
- Hotel, Resorts & Spas have maintained a strong position, ranking as the 11th highest spend category. In August, this category jumped rank from 15th to 10th with a 50% increase in money spent comparing August vs. September.
"The credit card industry continues its path to recovery with spend increasing month on month. Customer spend patterns reflect a trend towards leisure time and holiday seeking, with behaviour showing consumers are on board with the easing of isolation restrictions, and ready for a break." said Choong Yu Lum, Head of Credit Cards at Citi Australia.
Top 3 – spend by industry
| Category | % share of spend |
|---|---|
| 1. Supermarkets | 10.3% |
| 2. Household goods retailing | 8.85% |
| 3. Business services | 7.06% |
"Supermarkets and household goods consistently rank first and second in terms of spend for our customers. What's interesting here is comparing the September supermarket share of spend, which equalled 10.3% of total spend to April figures where we saw panic buying. In April, supermarket spend was at 13.5%. Looking at the amount of money spent at Supermarkets, spend peaked in March and was 30% higher than spend figures we are seeing today," Mr Lum said.
"While the downwards trend indicates we are gradually moving back to normal consumer behaviour, there are longer-term factors at play that could prevent a return to business as usual. People aren't dining out as much, people aren't travelling, and the increase of work from home means money usually spent at a CBD food court instead goes into the local supermarket. As consumers adapt to a new lifestyle, we anticipate supermarkets and household goods to retain the top billing in the near-term."
Top 3 – spend on rewards points
| Category | % share of spend |
|---|---|
| 1. E-Vouchers | 39.06% |
| 2. Gift Cards | 24.72% |
| 3. Select and Credit* | 12.96% |
| (*selecting to use rewards point for a credit card purchase) | |
"Rewards spend has changed significantly due to Covid-19. If we look back to research we conducted in 2019, over half of loyalty members stated they prefer to receive travel related rewards. Most consumers who normally save points for travel have not been able to use them, and so today no travel benefits have made our top three spend categories," Mr Lum added.
"In addition, we can assume that customers are shifting towards redemption options that allow them to stretch their dollar more in this environment of economic uncertainty. Vouchers, gift cards and select and credit are all options that allow consumers to be smart with their money and use their rewards points to make a purchase they would have made anyway, that little bit more affordable."
Credit card balances remain low
Total credit card balances began to drop significantly in April, with an 8.11% reduction in total balance compared to the previous month. Reductions month on month have continued, with a 6.7% drop in May. While the size of the reductions is now smaller, October balances remain approximately 24% lower than balances pre-pandemic in January.
"Across all demographics, we have seen less active users on credit cards since the beginning of the Covid-19 pandemic. We've observed a broader trend that many consumers are paying back debt during this period of economic uncertainty. It's a counter intuitive trend, as during the Global Financial Crisis of 2008, we saw customers entering into more debt.
"Our hypothesis is that the reduction in the opportunity for consumers to spend, coupled with the government support programs during the pandemic has kept our consumer's cash flow healthy. This means savvy consumers are taking this opportunity to pay down their debt," Mr Lum said.
The Victorian recovery
The daily average spend in Victoria increased 4% month on month, indicating increased activity due to the lockdown easing. Additionally, spend increased 7% in October compared to September, and 11% against August.
"Due to the more severe lockdown conditions in this state, Victoria has been the outlier when we look at spend recovery. New data shows Victorians breathing a sigh of relief, and it is positive for the economy that people look eager to go back to some form of normality," Mr Lum added.
What's next?
"In November, we typically see spend increase as consumers get organised for Christmas and other holidays. While we expect that spend will be diminished compared to the previous year, we are anticipating that month on month spend will increase across categories across Australia, though at a lower rate in Victoria," Mr Lum concluded.