Goldman Sachs: Small-business spending growth steady in October, with transaction decline narrowing

Spending growth is steady; how are transaction trends changing?

The Fiserv Small Business Index shows seasonally adjusted sales rose 2.3% year over year in October, slightly above September's 2.2%; the unadjusted year-over-year growth rate fell from 2.4% to 1.3%.
Transaction counts fell 1.3% year over year in October, a narrower decline than September's 2.0% and the best reading since February; growth in the average amount per transaction slowed from 4.3% to 3.6%. The improvement in transaction counts partly offset the effect of slower growth in the amount per transaction.

Essential spending rose 2.7% year over year in October, up from 2.4% in September; discretionary spending rose 2.0%, unchanged from September. Goldman Sachs believes continued strength in essential spending benefits CHYM, whose business is weighted toward everyday non-discretionary spending.
Rising gasoline prices continued to support overall spending: sales at gas stations and fuel dealers rose 23.2% year over year in October, making an important contribution to overall growth.

Retail sales rose 1.9% year over year in October, down from 3.0% in September, as the timing effects of the back-to-school season and Labor Day faded. Retail traffic still grew 2.2%, but the average amount per transaction fell 0.3%.
Sales at restaurants and drinking places fell 0.5% year over year, a smaller decline than September's 1.0%; the decline in transaction counts narrowed from 3.9% to 2.7%, but counts continued to fall. Among the subsectors, bars grew 3.7%, full-service restaurants grew 0.5%, and limited-service restaurants declined 2.2%.

Goldman Sachs believes overall spending remains resilient, benefiting payment providers such as FISV, GPN and XYZ that serve multiple types of merchants: their broad business coverage gives them exposure to different categories of spending.
Although restaurant transaction trends improved, restaurant sales remained weaker than those of small businesses overall. Goldman Sachs sees the signal for restaurant-related payment providers TOST, FOUR and XYZ as negative to neutral.