Consumer spending is in good health. Word of Mastercard
More attention is being paid to how and how much to spend but judging by Mastercard's second quarter financial results, consumers are (and will continue to be) well. Facts, numbers and predictions
Inflation gives no respite and people are paying more attention to their purchases. Yet for Mastercard, consumer spending “is healthy” and it also expects it will continue to be so.
In fact, according to the company's second quarter 2024 financial results , the company's global purchasing volume increased by more than 7% compared to a year ago, reaching a peak of almost $2 trillion in the three months ended June 30.
WHAT THE MASTERCARD RESULTS SAY
From the financial results released by the company, it emerges that Mastercard's profit, in the second quarter of the current year, rose by 17%, to 3.3 billion dollars. Excluding one-time costs, it earned $3.59 a share, versus estimates of $3.51, according to LSEG data .
Revenue, which also beat estimates, rose 13% to $6.96 billion.
July trends were also strong. Cross-border volume, a gauge of travel demand that takes into account card spending outside the issuing country, rose 17% year-on-year in July, the same as in the second quarter. Additionally, in June, the company's banks and other customers issued 3.4 billion Mastercard and Maestro-branded cards.
Mastercard, which has a particular vision of consumer health given its global reach and massive share of the payments market, believes the strong performance was aided by robust growth in key international markets such as Europe and Latin America, combined with the good health of US consumers.
SIGNS OF SLOWDOWN
Although Mastercard's earnings were better than expected, Reuters notes that they "grew at a slower pace than in the first quarter": "Exchange volumes, which measure the value of transactions processed on Mastercard's network, were 10% higher." % compared to the previous year in the second quarter, compared to 12% in the first three months of the year”.
THE REACTION OF THE STOCK MARKET AND THE IMPRESSIONS OF THE ANALYSTS
The stock market, however, welcomed the results and the company's shares jumped 5.6%, reaching the highest since April and extending its lead over Visa this year.
Having also beaten second-quarter earnings expectations, Mastercard reassured investors worried about customers' financial health "after a number of companies warned of pressure on low-income families", the news agency said.
Furthermore, results from main rival Visa last week had "probably spooked some investors", said Logan Purk, technology analyst at Edward Jones, while those from Mastercard "while not perfect, should provide reassurance that the spending environment remains solid".
PREDICTIONS
The payments company remains positive on the growth outlook and expects the health of consumer spending to remain unchanged in the near term. Indeed, although consumer health varies from country to country, where last quarter's economic results have ranged from small recessions to interest rate increases, Mastercard CEO Michael Miebach said that consumers “are supported by a strong labor market and some wage growth."
In particular, “in the United States, signs of a cooling of the labor market and still high levels of prices and interest rates could represent a risk for consumer spending, even if the decline in inflation and one or two cuts in interest rates over the course of the year could help offset this situation,” we read on Quartz . Reassurances also came from the Federal Reserve (Fed) which yesterday, despite deciding to leave interest rates unchanged at 5.25-5.50%, spoke of a possible cut as early as September.
Edward Harrison agrees with cutting rates as a solution to prevent a worsening slowdown in consumer spending, writing on Bloomberg : “Yes, overall growth in consumer spending is declining [see McDonald's , ed. ], but this slowdown is occurring in some places more than others [for example, in China , ed. ] and in reality it is not occurring everywhere. To me this speaks of a slowdown, not a recession. And it is a slowdown that reducing rates can help prevent from worsening."
However, uncertainty reigns supreme. In fact, according to a survey by the University of Michigan, US consumer sentiment "remains cautious", due to persistent inflation and uncertainty over this year's presidential elections.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/la-spesa-dei-consumatori-gode-di-buona-salute-parola-di-mastercard/ on Thu, 01 Aug 2024 09:24:30 +0000.