The BAC aggregated card data revealed a weakening in card spending with total card spending down 1.1% YOY over the 7-days ended Sept 12th. This is a reversal from the gain last week - the average YOY growth rate over the last four weeks of data was 1.8%. The recent volatility largely owes to the timing of the Labor Day holiday.
1. Labor Day holiday: As expected, after a strong gain last week, card spending reversed lower. This reflects the fact that the holiday came later this year so the YOY comparisons did not line up (Chart 2). The swing was also apparent for the population of card holders receiving unemployment insurance (UI) through ACH payments (Chart 9-11). This makes our analysis of the UI cohort challenging - we will have to wait for next week to have a better understanding of the recent trends. According to press reports, states are also increasingly distributing additional aid to the unemployed through the Executive Orders. We think this could start to support spending.
2. Regional differences: We are increasingly seeing a difference in spending trends by region. Generally speaking, the metro areas on the West Coast are weaker with total card spending falling meaningfully in Portland, Seattle and San Fran. This could reflect the impact of the wildfires along with partial lockdowns to fight the spread of COVID-19. On the other end, the strongest growth in spending continues to be in Detroit where the economy may be supported by the solid rebound in manufacturing activity.
3. Consumer behavior: We see further reengagement in the economy as people adapt to COVID-19. A good example is fitness clubs. We look at card spending at fitness clubs which typically spikes on the first of the month. After virtually no activity in April, May and June, we are now seeing spending at 40% of pre-COVID-19 levels (Chart 29). Fitness centers are particularly sensitive to the reopening orders from states. Another example is restaurant spending, which is running at 7% below pre-COVID-19 levels. However, there are differences by region with reopening mandates playing a role. For example, spending on restaurants is still contracting in CA and NY but rising in GA and TX.
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Samir Mayekar
Deputy Mayor
Economic and Neighborhood Development
City of Chicago
(M) +1 (312) 802 - 2535
(O) +1 (312) 744 - 8463
samir.mayekar@cityofchicago.org