The numbers don’t lie, or so the saying goes, and when you start analysing the depth of data that an international payment processor such as VISA owns it creates a fairly accurate picture of consumer spend patterns.
Wayne Best, Chief economist at VISA, presented updated payment data in Cape Town today, that shows how, on an index basis spend patterns have shifted over the past four years globally.
The data series is called the Visa Spending Momentum Index (MSI), and allows for detailed and better insights into what’s happening, payment wise, on a near real-time basis.
How MSI works
In essence, Visa will look at each account, depersonalised and anonymised, to determine if those accounts had higher spending than last year over the same month period. If this is true it scores 200. Should spending remain the same, it scores 100, and when spending decreases, it scores zero, creating a scaled and broad spectrum classic diffusion index with high levels of accuracy covering around 80 countries.
The MSI shows a clear explosion of spend growth back in 2021, driven by post covid “revenge consumer spending”, mainly based on increased travel spend after COVID.
This was followed by a drop in spend in 2022 after Russia invaded Ukraine, and then followed by a two year period of depressed spending with the index remaining below 100.
Influencing Factors
The big influencing factors globally have been higher inflation rates that finally saw reductions in the second half of 2024 and the higher interest rates that are only now starting to see widespread cuts by central banks in the second half of 2024.
Wayne Best comments on the rate decreases saying “So that sets the stage for a much more robust levels of growth that we see overall in the economy”.
Growth in spending patterns however, is not a global thing but has rather been restricted to particular areas.
Spending in Northern America, Europe is still slow while areas such as South America, where inflation has been curtailed earlier, have seen acceleration in consumer spend.
Data Providing Fresh Insights into Global Economies
Best comments that “I’ve been in this business for 35 years, and we’ve never looked at receivables this way before”. “We always look at receivables to say, how much is it growing? It’s growing 10% or 12% or whatever year over year.
Wayne Best believes that assuming moderate policy shifts, we should see that consumer recovery is still very likely and will continue across many of these countries in 2025. This is based on real personal consumption expenditures and not on GDP which makes a difference in perspective.
