Fiserv, Inc., a prominent provider of payments and financial services technology worldwide, has released the Fiserv Small Business Index for July 2024. This index measures the performance of small businesses across the United States, focusing on national, state, and industry-specific levels.
The July 2024 Fiserv SpendTrend report offers substantial information on declining consumer spending, specifically highlighting the effects of reduced foot traffic. Fiserv’s thorough analysis presents changes in spending habits and provides detailed performance metrics across various sectors, offering essential information for businesses operating in the current economic environment. Read on for further details.
Key Takeaways
- Decline in Consumer Spending Due to Reduced Foot Traffic: The report highlights a slowdown in consumer spending, with year-over-year (YOY) growth slowing to 4% in July, primarily driven by reduced foot traffic. Sectors reliant on in-person visits, such as retail and restaurants, faced significant declines, with retail seeing a 1.4% YOY drop in spending.
- Shift Toward Essential Services: While discretionary spending in areas like dining and travel declined, essential services, including insurance premiums and utilities, experienced robust growth. For instance, insurance spending surged by 18.2% YOY, reflecting consumers’ focus on necessary expenditures despite the overall economic slowdown.
- Regional Variations in Spending Growth: The report identifies notable regional differences. New England and the Midwest showed strong spending growth, at 6.8% and 4.2% YOY, respectively. By comparison, the Southwest exhibited the weakest growth, with spending rising by just 1.3%, indicating regional disparities in economic activity.
- Changes in Payment Method Preferences: Signature debit transactions saw significant growth, with a 7.5% increase in spending and a 5.4% rise in transactions, outpacing other payment methods. However, credit card usage grew more modestly, and PIN debit transactions declined, reflecting shifts in consumer payment behavior amid economic uncertainty.
Spending Growth Slows as Foot Traffic Declines Across Key Sectors
The latest Fiserv data indicate a slowdown in spending growth, a noticeable change from the stronger growth earlier in the year. In July, spending increased only 4% yearly, which is lower than previous rates.
Source: Fiserv
Sectors dependent on in-person attendance, like retail, restaurants, and accommodations, saw more significant drops. This downturn can be partly linked to seasonal trends that typically lead to lower consumer activity and spending in the summer months.
Small businesses, especially those in industries hit hard by decreased foot traffic, experienced the adverse effects of this slowdown. For example, retail stores faced difficulties as reduced customer visits led to lower sales and revenue. However, while some areas, like insurance and digital subscriptions, reported gains, physical stores struggled.
In July, same-store consumer spending also dropped. YOY sales growth fell to 3.3%, a decrease from June’s 5.0%. This downturn was mainly due to reduced foot traffic, with transaction growth slowing to 2.8% from the previous month’s 4.5%, marking the slowest since January.
Source: Fiserv
The average ticket size showed a minimal rise of 0.5%, suggesting that consumers spend approximately the same per transaction as they did the previous year despite a general decline in economic activity.
The report points out that the decrease in foot traffic plays a significant role in this overall slowdown. With fewer consumers visiting physical stores, there is a corresponding drop in the number of transactions, affecting revenue growth. This trend appears common across different sectors, indicating that the change in consumer behavior could be broad rather than limited to certain industries.
Essential Services Show Growth Amid Declines in Retail and Dining Spending
In July, the food and beverage sector saw a slight increase in spending, climbing to 3.5% YOY, up from 3.1% in June. This growth suggests that consumers focus more on essential purchases than discretionary spending. On the other hand, the restaurant industry faced setbacks, encompassing food services and drinking places. Spending growth dropped to 2.4% YOY in July from 3.7% in June, and foot traffic in restaurants also decreased to a mere 1.0%, the lowest since January 2024. This trend indicates a reduction in dining out, possibly due to economic uncertainties or altered spending habits.
The broader retail sector saw a downturn, with spending decreasing by 1.4% in July YOY, a sharper fall than June’s 0.4% decline. Transaction growth dipped into the negatives for the first time since October 2023, falling to -0.7%. Despite this general downturn, some areas, such as merchandise and other retail stores, experienced minor growth, 1.5% and 0.7%, respectively.
The travel sector faced significant cutbacks in discretionary spending, with growth plummeting to 7.1% in July from 18.6% in June. Similarly, travel spending slowed to 1.1%, down from 2.1% in June, with notable declines in short-term vacation and car rentals. However, hotel spending remained nearly unchanged, showing a minimal decrease of 0.4%.
The services sector, on the other hand, showed robust growth in July, increasing by 8.8% YOY. This was led mainly by essential areas like insurance premiums, which surged by 18.2%, utilities, which grew by 13.0%, and deferred tax payments, which saw a dramatic increase of 40.0%. This strong performance in essential services suggests that despite a decrease in discretionary spending, consumers continue to prioritize necessary expenditures.
Regional Spending Trends Highlight Strong Growth in New England and the Midwest, Slowdown in the Southwest
Source: Fiserv
The report details consumer spending trends across various regions. New England led with the most robust performance, with overall spending growing by 6.8% and transactions growing by 5.6%, with an average ticket size increase of 1.2%. The Midwest also saw strong activity, with spending growth at 4.2% and transaction growth at 2.6%, accompanied by a significant ticket size increase of 1.6%.
Alternatively, the Southwest showed the weakest growth among the regions, with only a 1.3% increase in spending and a 0.9% rise in transactions. The average ticket size in this region grew marginally by 0.3%. The South, West, and Middle Atlantic regions experienced moderate growth, with spending increases ranging from 2.5% to 3.8% and transaction growth from 2.0% to 3.1%. Changes in the average ticket size in these areas were negligible or minimal.
Credit Card Usage Slows While Signature Debit Transactions Lead in Consumer Spending Growth
The report sheds light on trends in consumer payment methods. Credit card usage saw a spending increase of 2.5%, with transaction growth higher at 3.9%, although the average ticket size for these transactions decreased by 1.3%. Meanwhile, signature debit transactions outperformed other methods, showing a 7.5% rise in spending, a 5.4% increase in transactions, and a 2.0% growth in the average ticket size.
PIN debit transactions, however, moved in the opposite direction, experiencing a decline with spending falling by 3.3% and transaction growth decreasing by 4.6%, coupled with a 1.4% reduction in the average ticket size. Transactions using EBT, predominantly for food and beverage purchases, had marginal increases, with spending slightly up by 0.2% and transaction growth at 1.5%.
About Fiserv SpendTrend Report
The Fiserv Small Business Index is released during the first week of each month and is unique in its approach, which directly aggregates consumer spending data from the US small business sector. Unlike other reports that rely on surveys or sentiment analysis, this index is based on actual point-of-sale transaction data, including card, cash, and check transactions made both in-store and online, across approximately 2 million small businesses in the US.
Using 2019 as a baseline, the index offers a numerical value reflecting consumer spending and a separate transaction index that tracks customer traffic. The data can be accessed through a straightforward interface, allowing users to explore information by region, state, or business category, which are classified according to the North American Industry Classification System (NAICS). The index is calculated monthly for 16 sectors and 34 sub-sectors, providing a timely and consistent measure of small business performance, even in industries typically dominated by larger companies.
About Fiserv
Fiserv, Inc. operates in the financial services technology sector. The company is divided into three segments: Payments, Financial, Corporate, and Other. The Payments segment offers services like electronic bill payments, internet and mobile banking solutions, inter-account transfers, personal payment services, and debit and credit card processing. It also covers payment infrastructure and various other electronic payment-related services.
The Financial segment delivers services to financial institutions, including account processing, transaction processing services, loan management products, cash management, consulting, and other financial transaction support services.
The Corporate and Other segment includes activities not directly tied to segment performance evaluations such as intercompany adjustments, amortization of acquired intangible assets, unallocated corporate expenses, profits from business sales, and related transition services. Fiserv was established by Leslie M. Muma and George D. Dalton on July 31, 1984, and has its headquarters in Brookfield, WI.
Conclusion
The July 2024 Fiserv SpendTrend Report underscores a notable slowdown in consumer spending, attributed primarily to reduced foot traffic across critical sectors. While essential services like insurance and utilities have grown significantly, sectors reliant on in-person visits, such as retail and dining, have struggled. Regional disparities highlight more robust performance in New England and the Midwest, contrasting with slower growth in the Southwest.
The shift in payment methods also reflects changing consumer preferences, with signature debit transactions leading in growth. This report is a crucial tool for small businesses to navigate the current economic climate and adapt to evolving consumer behaviors. As companies adjust to these trends, understanding regional and sector-specific dynamics will be essential for strategic planning and resilience.
