Mastercard's Michelle Meyer: Consumers 'Ready to Shop'

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Watch Mastercard's Michelle Meyer: Consumers 'Ready to Shop' - Bloomberg on Dailymotion

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00:00Talk to us about this sort of rift you're seeing form between what we're getting when it comes to

00:05the official data, also data from the conference board coming out today. It's certainly weak when

00:09it comes to U.S. Consumer Conference. Then you take a look at some of the earnings that we've

00:13got just in the past few days. You have Kohl's, Best Buy, Abercrombie & Fitch, and Dick's Sporting

00:19Goods, just some of the names offering improved guidance in terms of what they see. I wonder

00:24what you make of it all. So we can add to your list of information the data that we're monitoring

00:30and looking at very closely, which is our spending pulse figures, where we did similarly see a little

00:36bit of a softer September. By the second half of October and into November, we saw a really nice

00:40acceleration in spending. So for the month of October, retail sales, ex-autos, are up about

00:443.5% on a year-over-year basis. And we think that's a really good indication for where things will go

00:50as we look into the holidays. Back in September, we released our holiday sales forecast, which was

00:55for 3.6% year-over-year growth during that holiday season, with the e-commerce story really

01:02resonating, almost 8% year-over-year growth in e-commerce. So the data that we're seeing now with

01:07October coming in, that mid-3% pace, this acceleration to early November, I think very much speaks to a

01:13consumer that is still engaged and ready to shop during this holiday season. Which is interesting

01:18because, I mean, you just listened to some of the anecdotal data, if you'll call it that, about,

01:23you know, people are feeling stretched right now. They're feeling frustrated. But it kind of reminds

01:27me of the pandemic when the narrative was very much, okay, the consumer is miserable, but they're

01:32still spending. And I wonder if you see any parallels between that period of time and what we're seeing

01:37now. There are, in the sense that there was just a lot of uncertainty then, and there's a lot of

01:42uncertainty now. I think the consumer feels a bit unsettled because it's hard to predict what comes next

01:47when you have so many different headlines hitting that could influence your personal welfare,

01:54right, your finances. So even think about the government shutdown. There's a lot of uncertainty.

01:58Will the government reopen? What does it mean for me personally? How do I think about the path

02:02forward for the economy? And that could be unsettling, which could have been contributing to some of the

02:06conference board surveys that we saw, the consumer sentiment surveys we saw for November.

02:10But I think a lot of it ultimately comes down to what can I afford as a consumer who's coming in

02:17and shopping? Do I feel like I have the ability to find the best value? Do I feel like I have the way

02:22to make my purchasing power work the most that I can? And do I feel like I have enough income today and

02:28future income in order to facilitate that spending? And the labor market, although it has certainly seen

02:34a lower rate of churn, it is still largely supportive. And there's still a lot of values out there.

02:40There's still a lot of promotions hitting and consumers still have a lot of choice.

02:44So is that a good thing, though, Michelle, with regards to the promotions? I mean, we were talking on the show

02:48last week about how most of us, our inbox, our email inboxes have been already been flooded for the last

02:53couple of weeks with Black Friday deals. And I put that in quotation marks because apparently Black Friday was

02:59about three weeks ago, not not not three days from now. And it gets to this idea. I understand for from

03:05a consumer's perspective, that's good and entices us to spend. But how is that going to shake out when

03:09we start to see earnings in three months from time? Are we going to see margin compression? Are we going

03:15to see some pain for some of those retailers that may be discounted too much? Well, I mean, I'm sure

03:20retailers are trying to be as savvy as they can in order to make sure they're maintaining their market

03:24share. They're enticing the consumer, but they're doing in a way that doesn't sacrifice their

03:28profitability. And, you know, they're also navigating a different cost environment that they were last

03:33year. Last year, we had deflation, certainly disinflation for many categories. Costs were

03:39lower and they were able to do even steeper and more meaningful discounts. This year, it's a little

03:43bit more targeted because we do have some of the tariff induced price increases, some changes in terms

03:50of labor market conditions as well. So retailers are trying to navigate all of that while still

03:55maintaining that consumer interest. So, Michelle, when we add all this up and we talk about kind

04:01of the state of the economy through the lens of obviously consumer spending, I guess my question

04:06for you really isn't so much whether things are stable now. But the idea is, do you think that this

04:10is going to carry over deeper into 2026? Or is this sort of the last hurrah for consumer spending?

04:16Or is this just kind of that reset and we'll get back to whatever the baseline normal used to be?

04:20It's fascinating. I feel like there's been that sort of a last hurrah for consumer spending

04:24throughout this whole cycle, because there's been this question of how long can the consumer

04:28continue to engage? How long can the consumer power this economic cycle? And I think there's

04:34just like a lot of swings in consumer spending, right? We've gone from periods where consumers

04:40have paused, they've waited, they've tried to assess what's going to come next in terms of the

04:45economy because of a heightened uncertainty or fear of the health of labor market or their own,

04:50again, personal finances. And then they come back in when they feel a little bit more settled or they

04:55feel like it's the right moment to spend. So there's always some volatility in terms of consumer

05:00spending, just like there's volatility in the overall economic cycle. But to me, as long as the labor

05:04market continues to move along, as long as there's a low firing environment, wage growth continues,

05:11consumer balance sheets are largely healthy. And I think consumers will remain pretty engaged in this

05:17cycle. Well, that's what I was wondering, Michelle, because again, we're starting to get some economic

05:22data delayed, but at least it's coming out. And I wonder if what we're seeing when it comes to this

05:27still resilient, still spending consumer, whether that tells us something about the labor market,

05:32or is that not necessarily the direction that this information flows in?

05:37No, that's a fascinating question because we've been trying to figure that out ourselves. The fact

05:42that we see consumers spending into October and November at a healthy clip, does that indicate that

05:49indeed the labor market may have recovered a bit more? The September data showed a pickup in

05:54non-farm payrolls. So the number certainly improved in terms of job creation, although the unemployment rate

05:59was a little bit weaker with that pickup. So we'll see how things play out. We know from the jobless

06:05claims numbers that value rates remain pretty low. We have other labor market indicators from ADB and

06:11from other private sources, but it's really hard to figure out the full picture, I think, until we

06:15get that BLS data.

06:17And Michelle, just so we understand the relationship. So if we were to see a cooling down in the labor

06:24market, perhaps a contraction, I mean, how meaningful would it have to be to really impact consumer

06:29spending in a meaningful way? What do past episodes tell us?

06:32Well, it's circular, right? When the cycle starts to shift, it kind of shifts together and feeds on

06:38itself. So the extent to which the labor market weekends, you start to see job reduction because

06:43of a stress in corporate America. That means that purchasing power of consumers won't be as strong

06:48and consumers will start to cut back, which then fuels back into companies resizing their workforce.

06:54So it's kind of a natural feedback loop in the economy. And that's certainly not happening at

06:59the moment. We're in much more stability. And it seems like from what we're seeing from actual

07:06spending that that stability continues.

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