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Takeaway: American Express growth is likely to be stronger sequentially in the first quarter based on January and February SpendTrend data.

This note was originally published March 12, 2013 at 09:55 in Financials

February SpendTrend Data Shows AXP Should be in Good Shape for 1Q

First Data released its February SpendTrend data this morning, which tracks aggregate same-store sales activity in the United States. February showed modest month-over-month deceleration in credit card volume growth to +7.9% YoY vs. +9.2% YoY growth in January and +4.3% YoY growth in December. 

This brings the 1Q13 QTD growth rate to 8.6%, up from 6.7% in 4Q12. The correlation between the YoY growth rate in SpendTrend credit volume and AXP global volume is 0.72. The current 8.6% QTD rate of growth implies AXP global billed business will grow at 14.0% in 1Q13, up from 7.5% in 4Q12. 

Interestingly, the relative strength in the credit line was a divergence relative to the overall spending trend, which was negative. On an overall basis, including credit, debit and check, consumer spending volume growth in February decelerated to 4.6% YoY, which was down from 6.2% in January and slightly ahead of the 4.0% YoY growth in December.

FirstData flagged the following factors as notable contributors to the relative weakness of February's print: 

Retail dollar volume growth fell significantly in February to 2.5% compared to January’s growth of 5.7% as consumers tightened their discretionary spending budgets. This marked the slowest growth in the past twelve months. 

The combination of elevated taxes, federal tax refund delays, adverse weather and higher gasoline prices clearly curbed shoppers’ ability and willingness to shop in February. The fact that the personal savings rate significantly declined in January and consumers shifted more spending onto credit cards could be a sign that consumers may be overstretched. 

We like to use SpendTrend data as a proxy for American Express' intra-quarter momentum. Amex didn't provide a January update, as they normally do, on either their 4Q12 earnings call or at their recent investor meeting. 

It's also interesting to consider that Amex' international volume growth accelerated meaningfully in 4Q12 to 8.8%, up from 2.7% in 3Q12. With both U.S. and International now accelerating, and the benefits of cost cutting materializing, the company is in position to generate upside surprise to estimates (if they choose to let it flow through).


Is Amex Charging Ahead This Quarter? - spendtrend 2

Is Amex Charging Ahead This Quarter? - spendtrend 1