Mastercard sales data shows contrasts and rebounds

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After two years between apocalyptic events punctuated by moments of optimism, it seems that a real recovery is now underway, although significant obstacles remain.

Confirmation of the trend, Mastercard SpendingPulse Data for March 2022 revealed retail spending jumped 8.4% year-over-year and 18% from the same period in 2019, excluding auto sales and not adjusting for inflation .

While saying that taking into account gas prices and inflation growth is relatively stable, the former CEO of Saks Fifth Avenue Steve Sadovenow Senior Advisor to MasterCardtold PYMNTS that the new data nevertheless shows that “the consumer is holding on despite no longer having the stimulus check feeding it.”

Noting the still unstable give-and-take in the 2022 economic recovery equation, Sadove said: “Stores and experiences are reopening, [people are going] back to the office, and people start having to buy clothes again. He added that as people return to in-person shopping and dining experiences, “this is probably the slowest growth you’ve seen in e-commerce in a few years.”

Winking at the stellar e-commerce numbers throughout the pandemic, going from 12% of trade to 18% of trade virtually overnight and “by staying at this level, it’s not continuing that climb you have seen in the last two years”.

“Meteoric” can best describe economic forces such as pent-up travel demand now unleashing and reflected in data from SpendingPulse, which found airline spending rose 44.8% in March, restaurants doing better by 19.1% and accommodation by 46.4%.

Even hot spots in the data can be misleading.

“If I look at the low end, between the lack of stimulus checks and the disproportionate impact of gas prices and inflation, that consumer is going to be heading into some of the value plays,” Sadove said. . “But the underlying momentum continues to hold up in a challenging environment.”

See also: Mastercard: service expenses are making a comeback

Ready to lose the sweatpants

What PYMNTS has dubbed the “pandemic” — a portmanteau of pandemic and economics — is clearly at work, as both forces tug on consumer intent and purchasing power in a year of reversal.

Sadove listed several ways the pandemic is both uplifting and disrupting spending activity at the start of the second quarter, saying categories like domestic travel and restaurants are now benefiting, while other areas like tourism international are still depressed at the moment.

In retail, gloves – or should we say sweatpants – stand out.

“You have people who want something new in fashion,” he said. “All they were wearing was tracksuits. Now there’s a tremendous amount of change going on in clothing, partly because people have changed sizes or [because] a whole different fashion cycle is playing out.

Traveling and dressing up again can slow spending in some other areas, like household items. Sadove noted that as people aren’t sitting at home as much, they are turning to spending on things they couldn’t do during lockdown.

It’s more of a downstream perspective, as the latest data from SpendingPulse revealed that luxury sales were up 27.1%, apparel was up 16% and department store revenue was up 14%. .0% year over year.

Noting that Carnival Cruise Line had its biggest booking week at the end of March, Sadove is encouraged — but still concerned — about the extension of the current rally.

“I was in LA a week ago, and you’re dealing with $7 gas prices and your food inflation is pretty significant,” Sadove said. “There is going to be a limit. Even if people get decent pay raises, that consumer demand is going to be pretty big. »

Read more: U.S. online grocery prices jumped 7.6% in February, excluding delivery

Confidence mixed with caution

After the retail sales declines seen in January and February — not unexpected after the end-of-year holiday season, but more critical in this climate — Sadove called the 8.4% figure very healthy and telling. a consumer who has come through the worst intact.

While he expected a shift towards services to come at the expense of merchandise, he said: “It’s not that either – or, it’s been a bit of a ‘be it – and “, where they did both.”

This can be attributed to the higher savings rate seen during the pandemic and the repayment of credit card debt.

“You had a lot of money in people’s pockets,” Sadove said. “It’s going to come under pressure as we move forward, but so far the environment has been very healthy.”

Among the uncertainties that still weigh on the rebound, the rise in interest rates occupies the most important place. This will aggravate short-term inflationary pressures, with unpredictable results.

As data from SpendingPulse reveals an impressive 27% increase in luxury goods purchases, the former Saks Fifth Avenue CEO commented on luxury fashion e-commerce site Farfetch investing $200 million in Neiman Marcus Group , a year after Saks.com spun off into a separate company.

“These are both bets on building and using outside investment dollars to be able to help grow businesses,” Sadove said. “It’s a belief in the luxury sector. Mastercard numbers reinforce the strength of the luxury sector.

His optimism extends to consumers, who he says have weathered the pandemic well. However, factors such as a volatile stock market and broader global instability are still big wild cards, and this is reflected in retailer sales and inventory projections.

“It takes you to [feeling] really good for the environment [and] the numbers we see, he said. “But I get cautious when you look forward to know whether or not you’re going to see the same kind of momentum.”

Related: Farfetch to inject cash and break into Neiman Marcus and Bergdorf’s e-commerce operations

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