Card swipes show more consumer spending

Consumer spending is moving up strongly in percentage terms according to credit card swipes, SureSwipe says.

However, the value spent was down and debit card use - which rose strongly in December - plummeted in the first quarter of this year, it said.

"The statistics are encouraging and interesting," MD Paul Kent said.

SureSwipe - a credit card swipe machine service - has released statistics showing that December 2009 was down in rand spending terms by 6.7 percent compared to December 2008.

However, January 2010 dropped only 0.8 percent compared to the same month in 2009.

Kent said March 2010 consumer spending on credit cards was 10 percent up on March 2009 figures.

"Last year was a tough year for consumers and business, especially small businesses which are South Africa's biggest employers.

"But December saw a marked rise in spending particularly on debit cards which had seen slow spending all year and then moved up 2.5 percentage points in December, only to slump by almost four percent in January."

He said spending on debit cards had since crawled back to October and November rates.

The December rise in spending on debit cards was probably due to consumers using bonuses and therefore better able to use a cash based system.

"By January consumers were back to using credit," Kent said.

Credit card use monitored by SureSwipe in December dropped to two percentage points less than the spending levels in October and November -- which were similar.

Credit card use then rose by three percentage points in January, one percent above October and November figures, and had since settled to the same levels as those in October and November.

"What is heartening is that we saw as many transactions in March as in December -- the peak shopping time of the year.

"Consumers appear far more confident and are back in the stores shopping -- the only difference now is that they are more likely to bargain, ask for discounts or spend marginally less per transaction than last year."

Kent said the good news for the economy and small businesses and retailers in particular was that consumers were back in the stores.

"If this trend continues or is even buoyed by World Cup spending, it will prevent further business failures in the small and medium enterprise sector, strengthen retailers and slow or halt further job losses."

Kent pointed out that the sunnier economic picture echoed similar positive movement within major international economies.

"The United States saw economic growth of 3.2 percent in the first quarter of this year on the back of increased consumer spending.

"In the US and here, consumer shopping makes up more than 70 percent of the total economy."

Kent said that when consumers stopped spending then manufacturing went into decline and job loss rose.

"No economy can afford that and in South Africa we have been helped by banks slightly releasing last year's very tight grip on credit."