Visa Launches U.S. Spending Momentum Index—A New Way to Gauge the Economic Health of U.S. Consumers
Visa (NYSE: V) today launched the Visa U.S. Spending Momentum Index (SMI), an economic indicator designed to be a timely gauge of the health of consumer spending. The Visa SMI delivers insight into what drives upturns and downturns in spending by measuring the breadth of the momentum supporting these trends.
“This past year underscores the importance of looking not only at how much is being spent, but also how many consumers are spending,” said Wayne Best, Visa’s Chief Economist. “What made the most recent downturn and now recovery so different than any previous business cycle was how the pandemic impacted the ability as much as the willingness of consumers to spend. Understanding how many consumers are feeling sufficiently confident and financially secure to spend more is at the heart of what the Visa SMI does.”
In April 2021, the Visa SMI 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.