Slowest Growth in Three Years
First Data released its December SpendTrend data this morning, which tracks aggregate same-store sales activity in the United States. December showed further deceleration in credit card volume growth to +4.3% YoY vs. +6.8% YoY growth in November and +8.9% YoY growth in October.
On an overall basis, including credit, debit and check, consumer spending volume growth in December slowed to 4.0% YoY, which was down from 5.8% in November and 6.7% YoY growth in October. December's 4.0% YoY growth was, in fact, the slowest rate of growth in the last three years.
A portion of the weakness in December was attributed to fiscal cliff apprehension on the part of consumers coupled with the time-shift of excessive holiday retail discounting in November.
We like to use SpendTrend data as a proxy for American Express' intra-quarter momentum. The good news is that the underlying growth rate in credit-based spend volume has been more resilient in 4Q12 than the longer-term trend would have suggested. 4Q12 growth, based on First Data's numbers, accelerated to +6.7% from +5.0% in the third quarter. There's also likely to be a notable FX tailwind for the company in 4Q12, as we show in the last chart.
Our primary concern on Amex, however, remains the double impact of higher income tax rates on its top tier clients coupled with higher payroll taxes on all its clients. The company typically provides an intra-month update when it reports earnings. This quarterly update will be more interesting than usual, as it will shed light on both the impact of the new tax regime as well as whether there was time-shifting going on ahead of the fiscal cliff outcome.
Joshua Steiner, CFA