Payment Pulse – Ep. 14.1

Payment Pulse: The Power of Social Proof: Learn how influencer endorsements, online reviews, and peer behavior shape our buying habits.

Status Spending and Luxury Psychology: Understand why consumers use high-end payment methods to signal prestige and how brands capitalize on the “Keeping up with the Joneses” mentality.

FOMO and Impulse Purchases: Explore the role of limited-time offers and BNPL services in reducing purchase friction and triggering rapid spending.

Digital Trends on Social Media: See how platforms like Instagram, TikTok, and YouTube are revolutionizing product discovery and checkout experiences.

Cultural Influences on Spending: Discover how global payment preferences vary and why adapting to local norms is key for businesses expanding into new markets.

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Episode Transcript

Steve: Payment Pulse, a podcast by Clearent by Xplor, a leading full service payments provider. Welcome to Payment Pulse, a podcast by Clearant by Xplor, where we have a goal of humanizing and simplifying the complex world of payments. My name is Steve, and as always, maybe not as always, I should say. Max has been off a couple episodes here, but we’re back with Max.

Max, how have you been doing, man?

Max: Good, Steve. Yeah, you’ve found a lot of other hosts to fill in for me. But yeah, no it’s been well. We’re back talking about the economy, which gets me excited. There’s been a mountain of economic data that’s been released since our last small business episode.

And so it only seems reasonable to have a conversation today about how that might impact business going forward.

Steve: Yeah. Just a reminder for the listeners, this is something that we’re trying to bring to you monthly. So it’s really important data. I know Max gets excited about it, but it is high value for the payment space, but also just everyday business. With that said, let’s start at the ground level here with some of the big economic drivers.

What are the latest prints on inflation, the labor market, and personal consumption?

Max: Yeah, for sure. So, at the time of this recording, uh we’re still waiting for most of the May numbers to be released and that will start really in mid June. So, we’re going to be working through the April numbers today. And, I’ll be sharing my screen for those who are watching on YouTube.

The April numbers were really the first time we started seeing some of the early, effects of tariff policy and trade agreements that were made by the White House. So let’s just start with the inflation component. So, in April, the consumer price index index i.e. CPI for all consumers rose around .2% on a seasonally adjusted basis in April. That’s after a .1% decline in March over the last 12 months. So headline CPI increased 2.3%. Which is really the slowest annual gain since 221. So if you take a look at chart one here, we actually had a really great month in terms of inflation in April. After, 3 months prior that were slowly decreasing each month kind of really since January. May figures for CPI and and the same thing kind of goes for producer price index by the way. So we don’t show it here in the graph but producer price index which is kind of the index to show how the costs that producers face in the market for goods also decreased in April down .7% from March numbers.

So although it’s too early to tell what May has in store and what the effects of tariff policy might have on these price increases, it is a good start to the year. I think most people might have felt like this might have started to feel this whether it was grocery shopping or if you’re a business owner when you’re going and buying goods and inputs. So this is like the first interesting part of the the the metrics to start with today.

Steve: Can you help me understand a little bit more to what does that 2.3% increase in headline CPI actually mean for the average consumer? Are we are we finally starting to see inflation cool in a sustainable way?

Max: Yeah. So, again, it’s all relative. So, 2.3% really represents the difference between last April and this April’s prices, right? So, we’re comparing it to March. It’s kind of all of a relative value. So what it means is that the prices of goods are still increasing year-over-year, but they’re just not increasing nearly as fast. And so, while a consumer might go to the grocery store and still feel like, man, the price of chicken is still going up or the price of a bag of chips is going up slightly, it might not have been going up nearly as fast as it was a few months ago.

Now, as I’m going to jump into in a second here, there are other factors that contribute to how consumers view prices that aren’t necessarily the price tag that they’re seeing in the store. And one of those is your confidence in your ability to spend. If you think about your ability to spend, what does that come down to? It comes down to the ability to have a job that pays for things, right?

That pays you for the services you’re producing. So, let’s just jump in with that headline with that um segue into the labor market because I think this is a good transition moment. The labor market is very much at a point where we’re trying to sort out what’s going to happen next. meaning consumers aren’t sure whether the impacts of tariffs or AI development or a mix of other changes in the business and policy arena are going to impact their employment status.

At the time of this recording, we’re still waiting for May non-farm payrolls and the unemployment reports to come out actually this Friday on June 6th. But the April results are still worth discussing because they were fairly strong. Just for background these two data points non-farm payrolls and unemployment rate non-farm payrolls tracks just the change in the number of people employed during the previous month. That’s not including the farming industry for various reasons. While the unemployment rate tracks the percentage of the population that is not employed. So in both we saw in April a pretty consistent value to March, right? A pretty consistent result for March. And if you look at table two and three while you’re on YouTube, you can notice that these labor indicators almost stayed flat month over month from March. There’s a general understanding across both Wall Street and Main Street that it was probably too early to tell what type of impact the tariff policies would have on hiring at this point.

And so to go back to your question, Steve, around how to interpret prices of goods at stores for consumers, if people aren’t sure whether their employer is going to keep them there or maybe start laying off people, maybe you’re starting to feel like the squeeze of buying more expensive items. So all that’s to say, it’s too early to tell, but based on April’s employment data numbers from both the unemployment rate and the non-farm payrolls, it’s kind of a wait and see. owever, we did just get the April job openings numbers as well, which were a bit more optimistic,  optimistic in the sense of most folks thought that after liberation day, after tariff announcements, um after we kind of had a lot of questions open up around the status of international trade, most thought that April would be the first month we would see the number of job openings really decrease in the year. But little changed from March to April, we had about 7.4 million jobs added to the economy holding at roughly 4.4% openings rate, which is all the jobs opened versus the jobs that are existing. Which again might signal that it’s too early to tell whether there’s going to be a massive  impact of trade policy on the labor market. It’s worth noting in that comment though that we did see job openings fall in the services industry, so food services in particular, by 135, jobs. And that may start to signal that there’s some hesitancy by some of these restaurant owners to overstaff their restaurants ahead of potentially rising . input costs.

So again, it’s wait and see, but there are small little nuances to this consistency that we’re seeing in April versus March. I know I just kind of gave you a ton there, Steve, on a very maybe what seems like a simple question, but it’s much more profound than perhaps most people think it is. Hopefully I’m making it a little more clear than it is mud.

Steve: It’s definitely helpful. Like you said, it might be a little too early to tell the full effect of the tariff policies on hiring. Maybe in a short summary, can you kind of define what maybe some of the indicators are that we should start to look for in the coming months that would suggest a real shift back to the employment trends?

Max: We’re going to see, like I said, we’re going to see data for non-farm payrolls and unemployment come out this Friday. So, that will be something that Wall Street that hopefully Main Street is really queued in on because that will tell us whether the economy is expanding and the labor market is expanding or contracting. 

Most people there’s actually a growing consensus that we’re going to again have a maybe a flat month. It’s a little too early to tell even in May whether companies are significantly contracting their hiring. But I would venture to say that between the labor market and spending and inflation I would hope you know labor Economics, macroeconomics would those economists would suggest that with all this policy that’s come out, we should see inflation spike a little bit. We should see labor demand go down a little bit, but we’re not seeing that. So, it’s a little too early to tell.

There’s a laundry list of reasons that analysts have said that this isn’t happening the way that traditional economics would say it would. But there is this other third trunch of things to look at and that is consumption that I think will start to point us in the direction of are we moving towards a recessionary environment or are we going to kind of come out of this stronger than we expected.

So, let me move over to consumption real quick because this is kind of an interesting realm, especially for the payments industry and consumer and how we think about as a payment processor at Xplor Pay, the health of the economy that we’re helping. The thing that I get really excited about and really interested in at Xplor Pay is personal consumption expenditures and retail sales, right?

So personal consumption expenditure is this metric that shows how much are individuals consuming on a month-to-month basis, right? It’s this kind of proxy for are you spending more or less than you did in the prior year. And when we look at April, we only saw a .2% increase in personal consumption expenditure year-over-year. That’s down from .7% in March. So if you see I’m if you’re online  you see on graph four that we we started the year very much down like we were in January at negative PCE growth.

We then had two successive months in January and February or sorry in February and March of year-over-year growth in personal consumption expenditure. And now we’re kind of back down to a very mediocre growth level. Now what that tells me is on an individual basis, people are spending less.

And as we aggregate that up across the population, we see that translates into significantly lower retail sales. So similarly on graph five here on YouTube US retail sales dropped dramatically in April from a 1.7% gain in March to only a.1% gain in April. So again, probably too early to take this away and say, “Oh my gosh, everyone’s freaking out about, you know, the economy or that we’ve completely, people are spending less and we’re not spending, we’re no longer spending on discretionary items or on retail. But  these two metrics both the personal consumption expenditure as well as US retail sales highlight that we might be we might be contracting a little bit. We might be people might be clutching their purses a little bit more than they than they were at the beginning of the year or at the tail end of last year. And so those are some harder numbers that I kind of look to and I say that’s not a great sign for the economy. It’s not a great sign that like consumers feel good about what the future holds in terms of prices and in terms of spending.

However last piece of kind of evidence here that I find even more exemplary of this trend is that every month there’s this figure that comes out of the institute for supply management services and they do what is called the PMI which is the purchasing managers index which shows the growth or decline of manufacturing purchaser basically how purchasers are purchasing. After a pretty robust end of 2024 and now and fairly consistent start to 2025, we saw one of the lowest indices one of the lowest scores for this indicy in the last basically year and that is we came in at around 49.9% when we were expecting somewhere around 52. It’s showing that people who are in businesses are kind of pulling back away from spending and pulling away from wanting to go out and spend on items for  their business and there was a good quote by the chair of this survey committee for the institute of supply management services and that was he said the respondents continued to report difficulty in forecasting planning due to longer term tariff uncertainty and frequently cited efforts to delay or minimize ordering until impacts become clear.

So I mean when we talk about like how is the economy growing or is the economy growing really at the at the core of it I mean we have to ask ourselves are the businesses that underpin the economy going out and spending themselves and this suggests that they are pulling back. So, I’m worried that this actually could potentially be one of the one of the harder pieces of data that we have, a leading indicator that there actually might be some slowdown coming.

We’re just a little too early to start seeing that in some of the other bigger numbers that we see on CNN, CNBC, the like. So again, I threw a ton out at you, but it’s really too early to see it in some of these bigger numbers, but there’s some evidence that people are pulling back from spending both on the consumer side as well as the business side.

Steve: All right, folks. Going to leave you on a little bit of a cliffhanger here and we’re going to break this episode into two parts. There’s a lot of data that we’re covering in the first half of this  this series.

But want to get back to essentially having a little bit more concise, episodes, a little bit more digestible. We did, like I said, cover a lot in that first half.

The second half, we’ll come back and we’ll summarize a little bit more of the data points that we have and what that really means for small businesses and some of the things that small businesses can do to better navigate the times ahead and  really prepare for the future. So with that said, we appreciate you listening to Payment Pulse as always and we will see you in about a week or so for this second part.

But we appreciate you listening and we will see you really soon.