A new report from Mastercard Inc indicated that “runaway inflation” was hurting low-income customers’ spending habits, including travel purchases.
According to Reuters.com, the study found that cardholders are shifting their priorities from big-ticket items to essentials and groceries, but travel still remains a priority and helped the credit card company complete a strong quarter. .
Mastercard has recorded its strongest summer travel season since the start of the pandemic, thanks to pent-up demand and the easing of coronavirus-related restrictions. International volumes also increased 58% in local currency in the second quarter, increasing dollar volumes on the company’s network by 14% to $2.1 trillion.
“In the US, what you’re seeing is a downward trend in terms of growth rates on the lower income side,” Mastercard Chief Financial Officer Sachin Mehra said during a quarterly investor conference call.
While higher-income consumer spending and rising international volumes will continue spending for now, the company is looking at the possibility of a recession after two quarters of contraction as a sign that travel spending may decline.
Credit card company Visa Inc told Reuters the company has yet to see signs of a retraction in spending by its cardholders.
In June, location-based insights provider PlaceIQ released new data revealing that Americans are back on the bandwagon after two years of decreasing travel and decreasing visits to retail and restaurant locations.
However, US consumer spending in these categories is down from last year. The data suggest that the current inflation situation is to blame for the trend in consumer behavior, not pandemic-related factors like social distancing or stay-at-home alerts.
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