Credit cards in December

An Saoi: The Central Bank provides an analysis of credit cards as part of its monthly statistical report. It is the very final Table in the monthly report. It is of interest because expenditure on credit cards follows the trend of movement in retail sales, excluding motor vehicles (a person is unlikely to buy a car on a credit card.).

The December figures don't disappoint, and reflect the trend CSO estimates for December (Table 2). Helpfully, the report provides a split between cards held personally and those held for business purposes. The new expenditure on business cards is holding steady, but expenditure on personal cards fell by 11.3% against December 2009 & 27.5% against December 2007, when the Irish recession was getting going. Seamus Coffey has a vey good review, complete with numerous graphs, of the December retail sales available here.

The report also shows an extraordinary decline in the number of personal credit cards issued in Ireland, a drop of 36,000 cards in just one month and a drop of 103,000 in the last twelve, leaving just 2,072,000 in use, still a huge number by continental European standards. This fall is significant in itself as it reflects the closing off of access to short-term borrowing for a very large number of people.

New personal expenditure on the cards has fallen back to the levels of December 2004 and indebtedness is also falling albeit at an excruciatingly slow pace. The balance outstanding (owed) is now “just” 3.37 times the monthly expenditure
It would be interesting to know how many of the cards were cancelled by the issuer or voluntarily handed back. Also how much outstanding debt was written off or converted or “consolidated” into loans on cancellation.

However if we look at the trend, then it is clear that activity in the economy will continue to fall for sometime yet. Credit cards are used by many Irish people for their regular out of pocket purchases. This is called "Froopp" in the language of Eurostat (Frequent Out Of Pocket Purchases), which represent a large proportion of personal expenditure. A drop in credit card activity represents a decline in overall consumer activity. A decline in credit card numbers represents a serious decline in the confidence levels of both the issuing banks and consumers for the future.

Credit card spending is not restricted by weather, indeed bad weather is a boon for internet shopping, for which a credit card is a pre-requisite. The bad weather should be reflected by greater use of credit cards, not less as people used the internet instead of venturing from their homes.

Unless we see some upturn in the domestic economy very soon, the Central Bank's recent gloomy forecasts will begin to look overly optimistic.