When was the last time we looked at consumer spending data in real time? month agoWe observed a staggering increase in trends in spending on Bank of America credit and debit cards, when by early June, total spending on cards compared to the previous period had almost recovered.
Without a doubt, much of this was due to the growth of personal income since the beginning of the current recession, which, as we explained earlier was a function of an extremely generous fiscal stimulus, which meant that per capita applicants received an average of about $ 788 per week ($ 41,000 per year), well above the usual amount of about $ 300 in a regular work environment (15-16 US dollars). year on year).
Unfortunately, these large-scale government brochures and this impressive increase in spending are now coming to an end, and, as JPM writes, in the data until Sunday, July 5, Tracking bank spending by a group of 30 million Chase credit and debit cardholders remains below its recent peak on June 22, and appears to have fallen at that lower level, as COVID-19 is spreading rapidly in parts of the country.
What is noteworthy is that, contrary to widespread jokes that the states of the sun belt have slowed spending, JPM notes that this modest rollback in national spending was not due to a sharp rollback concentrated in states where the virus spreads rapidly, but rather modest kickbacks that are widespread in different states. On the other hand, this model raises concerns that behavior has not changed enough to stop the spread of the virus in the most affected states.
Of course, holidays such as July 4 may complicate the distinction between signal and noise in high-frequency data, and some methods for calculating cost comparisons over the past year have naturally changed dramatically in recent days, given the time of the weekend. But even if you look through these swings, spending began to level off at a slightly lower level than the peak reached on June 22.
JPM also notes that cost reductions since the end of June have been widespread across states. There is some correlation between the spread of the virus over the past two weeks and cost reduction, but so far this relationship has been modest. This model suggests that in all states there are cautious consumers who have reduced costs because the virus resumed its spread, but the rapid spread of the virus in some states did not lead to significant changes in the behavior of the entire population of the country. these conditions.
In fairness, it should be noted that recently there has been a slightly more significant decrease in costs in segments that are likely to be most susceptible to the spread of the virus. For example, expenses for “presenting a card” (essentially personal) fell more in Texas than in New York, and expenses of Texas millennia, which returned to the level of last year by mid-June, decreased more than in the New Year. York Millennials. However, bank economists are most struck by the relatively small differences in changes in the behavior of these groups in recent weeks.
Meanwhile, as we first noted last week, JPM found a correlation between spending and subsequent spread of the virus three weeks ago, and it has remained strong for the past three weeks. Indeed, to date, the bank has found that in states with higher spending levels, especially with cards in restaurants, the virus has grown more rapidly in recent weeks.
To summarize, JPM has documented two important facts about the relationship between costs and the spread of the virus:higher spending levels predict the spread of the virus, but spending levels have not fallen much in the states where the virus has spread most rapidly lately. These two facts raise concerns that behavior in the most affected states has not changed enough to stop the spread of the virus in the future.
However, it is possible that other behavioral changes that we cannot measure can stop the spread. As one example, it is possible that the relationship between restaurant spending and the spread of the virus is simply a correlation, and that this may be due to other behaviors, such as going to bars or parties, that are associated with restaurant spending. Now that bars are closed again in Texas, Florida, and southern California, the spread of the virus is likely to slow even if restaurant spending remains high. But the facts shown in the JPM data do not give reason for optimism.