Visa’s U.S. Spending Momentum Index closes on high note in December

Consumer spending ended the year on a strong note.

The Visa U.S. Spending MomentumIndex (SMI) was 108.4 in December, its strongest reading for the month since the start of the index. For the last three months of the year, the index was 110.3, also a high for the fourth quarter of the year. The index was 111.9 in November (seasonally adjusted), up 1.3 points from October.

The Visa SMI is an economic indicator of the health of consumer spending. When it rises above 100, the consumer spending momentum is strengthening and when it falls below 100, the spending momentum is weakening as fewer consumers are spending more relative to the previous year.

By category, the SMI for discretionary purchases fell 4.9 points from the previous month to 103. The SMI for non-discretionary purchases rose 0.1 points to 99.9. On a regional basis, the SMI fell the most in the Midwest and South, with both declining 4 points for the month.

The Northeast reading fell 2.5 points and the West slid 1.8 points. The West was the strongest performing region in December with an SMI reading of 110.1.

“The SMI’s strong readings from October through December suggests that consumer spending ended 2021 on a strong note,” said Wayne Best, Visa’s chief economist. “However, this month’s SMI reading additionally shows that there were adverse impacts to consumer spending in December, likely related to both the virus spread and severe weather across much of the country.”

The Visa SMI provides insight into what drives upturns and downturns in spending by measuring the breadth of the momentum supporting these trends. The index is adjusted for day of week, month, holidays, and broad annual trends, and these seasonal adjustments are subject to revision each year.