Credit card holders swipe more as outstanding card balance jumps by nearly Rs.3bn

The card holders appeared to have begun to swipe their credit cards again, after being on the sidelines for long due to the higher rates and red-hot prices, as the April card spend data showed a significant increase in the card outstanding balance. 
According to the Central Bank data, the total outstanding card balance rose by Rs.2,766 million in April, bringing the total to Rs.143.3 billion, slightly above the Rs.143.1 billion stood at the start of the year. 
This is after a decline in the total outstanding by around Rs.500 million in March. 

Credit card spend provides somewhat a distant idea about consumer spend but it isn’t a clear gauge of consumer spending in the economy, which is still at an extremely anaemic level. 
April anyway doesn’t provide a broader idea of general consumer spending patterns, as people generally spend more during the traditional new year season, especially on travel and holidaying.
The card issuers too stepped up their offers in recent times, with attractive discounts on stays in resorts, among other things to lure the local traveller.

What could bolster card spending is fast-declining inflation coupled with the decline in the interest rates. 
The credit card interest rates were cut by 200 basis points to 34 percent earlier last month, soon after the 250-basis-point cut in key policy rates. But this isn’t likely to bring a significant impact on card spend. 
This is because the current rate of interest on cards remains still restrictive and is nearly double the 18 percent rate that was there before the rates started going up last year. 

Higher card spending could also be a sign that people are dipping into their credit cards when their incomes are hardly sufficient to meet their weekly grocery bills, due to record high prices.

Despite the official indices on consumer prices indicating a faster decline in the prices of everyday goods and services, the true prices still remain largely unbudged, with the exception of a few such as energy.  
Sri Lankans are paying triple the prices for many things they buy from the levels roughly more than a year ago. But their incomes haven’t changed much. 

People with credit cards are therefore compelled to go into card debt, the easiest form of consumer debt to at least maintain their consumption patterns at the bare minimum levels. 
Meanwhile, the manufacturers and companies aren’t fully transferring the benefit of declining prices in their supply chains to the end consumer to take the benefit of fatter margins. 

The European consumer authorities are closely monitoring the food manufacturers and other companies in the supply chain, to police which company isn’t passing down the benefit of the decline in its cost through revision in sticker prices. 
These governments are effectively cajoling the companies to cut prices, as they have found that fatter profits in recent times are a key reason for the stickier inflation in those economies.