Wed, 12 May 2021 | consumer spending
In April 2021, the Visa U.S. Spending Momentum Index (SMI), an economic indicator designed to be a timely gauge of the health of consumer spending, hit 136.0, confirming that the U.S. economic recovery remains on firm ground. At its current level, the Visa SMI implies that 65 percent of consumers are now spending more than they did a year ago, while only 35 percent are spending the same or less. Even compared to April 2019, which was not affected by the pandemic and lockdowns, 51 percent of consumers are spending more. The SMI reached its lowest level in April 2020 at 70.5 and did not pass 100 again until October, indicating that many people were still unable to participate in the recovery for much of 2020. While the downturn this time was deeper, the recovery has been six months faster than the recession of 2008-2009.
“The SMI’s latest strong reading provides evidence that consumer confidence is building as the pace of vaccinations increase and restrictions are eased across the country,” added Wayne Best. “Signs of economic recovery, additional stimulus payments and optimism that the pandemic is waning are contributing to stronger spending compared to last year and even within recent months."
The gains in spending momentum, however, remain uneven. The SMI for cities that experienced the greatest job losses in April 2020 has been on average 1.5 points lower over the last year than cities where job losses were more limited, indicating that fewer consumers were able to join the recovery where joblessness was higher. The SMI for Chicago, one of the hardest hit cities in terms of job losses, has averaged 100.5 over the last 12 months, compared to a city with fewer job losses such as Atlanta, where the SMI was 104.0 over the same time frame. The gap between the two has narrowed within the last three months, helped in part by Chicago’s progress in vaccinating a greater share of its residents.
The Visa SMI is based on a sample of aggregated, depersonalized VisaNet data. Visa adjusts this data through proprietary methods to exclude factors that do not reflect spending momentum. The resulting sample data is then aggregated using a diffusion index framework where index values are scored from 0 to 200. When the Visa SMI rises above 100, the consumer spending momentum is strengthening and when it falls below 100, the spending momentum is weakening as fewer consumers are spending more relative to the previous year. The index is adjusted for day of week, month, holidays, and broad annual trends, and these seasonal adjustments are subject to revision each year.
Source: Visa SMI