Citi Australia
Citi Australia Credit Card Index: July - August 2021
HIGHLIGHTS
2021 lockdowns mute credit card spend, but consumer confidence shows resilience
Highlighted Findings:
- Spend on credit cards dropped 14% from June to July, recovering 4% in August on the previous month, as COVID lockdowns hampered consumer spending.
- The drop has been more short-lived than the 2020 impact on spend. While July 2021 volumes are 5% lower than July 2020, spend volumes in August 2021 are 2% higher than the previous year.
- NSW saw the sharpest decrease in spend volumes comparing June to July, as they grappled with the longest period of lockdown.
"In July we watched history repeat itself, with spend volumes dropping across the country as citizens tightened their belts amidst the latest outbreak. This could be driven by an individual's reduced earning capacity, or their reduced spending capacity while they are house bound. Despite lockdowns lingering throughout the two-month July to August period, we have seen spend recover in August. This could indicate that consumer confidence is not as sharply dented as in 2020, where we saw several consecutive months of muted spend," said Choong Yu Lum, Head of Cards and Loans at Citi Australia.
Lockdown states experience the most severe drop in spend
"New South Wales saw the sharpest drop in spend in July, with figures reducing 23%. The ACT, impacted by lockdowns in August, also saw spend drop 11% on the previous month. Spend in Victoria dropped 7% comparing July to June, and a further 1.4% comparing August to July. We can speculate that as Victoria is now more experienced at managing lockdowns than other states, consumers are more comfortable maintaining their regular spend patterns," Mr Lum added.
Top 10 – spend by industry
July
| Category | Share of spend |
|---|---|
| 1. Supermarkets | 10.84% |
| 2. Household goods retailing | 8.09% |
| 3. Business Services | 6.79% |
| 4. Insurance | 6.76% |
| 5. Health/Medical | 5.697 |
| 6. Legal/Tax Services | 4.68% |
| 7. Retail Goods | 4.28% |
| 8. Sports and hobby stores | 4.25% |
| 9. Restaurants | 4.04% |
| 10. Computer/Technology Goods | 3.48% |
August
| Category | Share of spend |
|---|---|
| 1. Supermarkets | 11.75% |
| 2. Household goods retailing | 8.25% |
| 3. Legal/Tax Services | 7.03% |
| 4. Business Services | 6.67% |
| 5. Insurance | 6.35% |
| 6. Health/Medical | 5.75% |
| 7. Retail Goods | 4.44% |
| 8. Sports and hobby stores | 4.01% |
| 9. Restaurants | 3.76% |
| 10. Computer/Technology Goods | 3.65% |
"It's not a surprise to see spend at restaurants and hotels and resorts drop in July and August while consumers isolate at home. Instead, consumers are spending more in categories like retail goods or computer/technology goods, presumably to purchase items for home entertainment or remote work," Mr Lum said.
Credit card applications show surprising resilience
"In line with a trend we saw last year, less Australians apply for a credit card during lockdowns. However, if we look at the week ending 3 September, our total acquisition volume is starting to rebound, up 27% on the previous week," Mr Lum said.
"To drive card uptake, credit card providers have a role to play in terms of delivering a credit card that has relevant perks during a lockdown. For example, we have recently added complimentary mobile phone insurance to our rewards credit card, off the back of feedback that travel insurance was no longer as compelling. Additionally, we are sending out regular offers like discounts on streaming services or food delivery to make sure our rewards credit cards are doing just that – rewarding consumers in a challenging time."
What's next?
"Already in the first week of September we have seen card spend increase by 8.2% against the prior week. Next month, as we hopefully gain more clarity on the path to normal life, we anticipate that spend will only increase. October school holidays typically cause a spike in spending on recreation activities, and it will be interesting to watch which spend categories spike as families seek recreation that fits within COVID-safe guidelines," Mr Lum concluded.