Visa announced that the U.S. Spending Momentum Index (SMI) was 109.3 in February (seasonally adjusted), up from 102.4 in January. As COVID-19 case counts fell, consumer spending momentum resumed its robust pace of expansion.
The Visa SMI is an economic indicator of the health of consumer spending. 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.
Consumer spending momentum gained strength across all age groups, helping to reverse a three-month slide. The growth was fastest in U.S. consumers over the age of 65, helping to close a gap that had opened between that cohort and younger U.S. consumers (aged 25-44) during the pandemic. Spending momentum by older U.S. consumers lagged an average of 9.1 index points from March 2020 through January 2022, and reached as high as 17.2 points in November 2020. In February 2022, the gap narrowed to 3.2 points, which brings it closer to pre-pandemic levels.
By category, the SMI for discretionary purchases rose 4.1 points from the previous month to 104.7. The SMI for non-discretionary purchases rose 4.5 points to 101.9, signaling a positive acceleration in spending momentum relative to this time last year. On a regional basis, the SMI rose for all four regions of the country relative to last month, signaling a geographically broad-based acceleration in spending momentum on a year-over-year basis. The SMI for the South posted the strongest gain, rising 8.9 points to 110.4, followed by the Northeast with a rise of 7.3 points to 109.3. The Midwest (+5.6) and West (+2.9) also posted increases for the month. The stronger acceleration in SMIs for the South and Northeast regions marks a reversal of the deceleration in spending momentum for these areas last month, suggesting that both virus cases and severe winter weather played a role in reducing spending momentum last month.
“We have been surprised by the resiliency of U.S. consumers through the ongoing uncertainty of the pandemic and persistent elevated inflation,” said Wayne Best, Visa’s Chief Economist. “We will continue to watch closely how inflation affects consumer spending as the year progresses.”