Velera Finds Consumers Getting Twitchy With Spending as Inflation Fears Rise

The folks at Velera are usually as sunshiny as Florida, where they work. Yet this month’s report’s “Deep Dive” was on “economic uncertainty.” Why all the frowny faces now?

For one, core CPI, which excludes food and energy and is more closely watched by the Fed, rose 0.3% from June to July, up from a 0.2% gain in June. For the 12 months ending in July, core CPI rose 3.1%, up from a 12-month gain of 2.9% in June.

“The ripple effects of tariff policy and inflationary pressure are beginning to show in consumer behavior,” Brian Caldarelli, Velera’s chief administrative officer, said. “We’re seeing a shift towards essential purchases, cautious discretionary spending and early stockpiling — especially among younger consumers.

“These patterns reflect a growing sensitivity to economic signals and a desire to get ahead of potential cost increases,” he said.

With many of the adjusted tariffs taking effect on Aug. 7, the report said consumers are expected to feel the impact on the cost of goods in the coming weeks and months. “While many retailers have been able to maintain current prices and absorb the costs of the import taxes on goods made abroad, these taxes may be passed on to consumers as tariffs rise,” Velera analysts said.

July spending was goosed by an earlier start in back-to-school shopping, the report said.

A survey by the National Retail Federation found 67% of back-to-school shoppers started buying in July, up from 55% last year. Also, 51% of the early back-to-school families said they started early specifically out of concern for rising prices due to tariffs.

The report said the effects of the tariffs are likely to start being felt in the final months of this year. Against this are moving implementation dates for constantly changing rates.

“This uncertainty appears to have led to increased consumer purchases in advance of looming tariffs, along with drops in consumer sentiment across various surveys,” the report said.

In the four months since President Trump’s April 2 announcement of steep increases in tariffs for countries around the globe, Velera found discretionary spending fell 1.7% by credit card and rose 4.9% by debit, but the growth rates have been slowing in recent months.

Nondiscretionary spending rose 2.2% by credit and 5.2% by debit.

“Within debit discretionary spending, growth in legal online gambling/betting continued to increase. When excluding gambling, the growth in discretionary debit purchases dropped from 4.7% to 3% year to date,” the report said.

Velera also found a surge in debit spending and transactions per account at wholesale clubs in March, April and July, which it said is “likely reflective of a preemptive attempt by consumers to stock up on goods and combat inflationary concerns resulting from tariff announcements.”

Meanwhile, consumers, especially millennials, have been slowing down their spending for streaming services since March, “reflecting the challenge of retaining and attracting new customers in an environment with higher prices and economic uncertainty.” By July, purchase growth neared zero for millennials.

Velera bases its Payments Index on data from credit unions that have been processing payments with it since January 2023. This month’s report encompassed 3.5 billion transactions valued at $176 billion of credit and debit card activity in the 12 months ending July 31.

Contact Jim DuPlessis at JDuPlessis@cutimes.com.