Visa: Omicron’s Spending Impact Less Than Past Variants

COVID-19’s omicron variant had less of an impact on U.S. spending than previous stages of the outbreak.

That’s according to the latest edition of Visa’s U.S. Spending Momentum Index, which tracks the health of consumer health spending.

The SMI for January, according to a report released Thursday (Feb. 10), was 102.4, down from a revised 109.4 in December. When the SMI is above 100, it shows consumer spending momentum is strengthening; when it falls below 100, the spending momentum is weakening as fewer consumers are spending more relative to the previous year.

“The SMI’s decline from December was due in large part to the rise in new COVID-19 cases with the spread of the Omicron variant,” the report said. “This current wave’s impact on spending was less than prior outbreaks, and for the most part has not derailed the recovery as more households continue to spend more than they did last year.”

The credit card company adds that research by its Business and Economic Insights team shows that while consumer demand has been less impacted with each successive wave, business disruptions have risen, which helps contribute to the upswing in inflation.

Figures released Thursday (Feb. 10) by the U.S. Bureau of Labor Statistics showed that consumer prices rose 7.5% since the previous January, the highest rate of inflation since 1982.

Read more: Inflation Reaches 7.5%, Breaking 40-Year Record

“The SMI readings continue to reflect that there is a clear indication of spending growth moderation in January,” said Wayne Best, chief economist at Visa. “That said, we expect more robust spending in the months ahead as virus concerns slowly subside.”

By category, the SMI for discretionary purchases dropped 3.9 points from the previous month to 100.6, while he SMI for non-discretionary purchases decreased 2.4 points to 97.4.

On a regional basis, the SMI fell for all four regions of the nation compared to last month but showed continued positive spending momentum on a year-to-year basis. SMI readings in the South (101.5) and Midwest (101.8) were among the lowest, followed by the Northeast (102.0). The drop spending momentum in these three regions indicates that severe winter weather may have helped hamper consumer momentum for the month. The West continued to have the strongest SMI reading, coming in at 106.1.