For decades now, the American economy has been based on consumer spending. This has created the current situation with debt, where building upon more debt, people are impoverished and until this issue is solved, the problems will continue. Many companies hope to continue the fruitless and wasteful spending, but as Business Insider reports, credit giant JP Morgan says that there is not enough available credit to drive an economic “recovery”.
Americans are spending again, but the trend may not forecast the economic recovery markets are hoping for.
Using Chase credit and debit card data, JPMorgan found consumer spending has “rebounded significantly” from its late-March trough. While the start of major lockdowns pushed spending down 40% year-over-year, the metric has retraced roughly half of its decline as of May 23.
Yet the bounce-back in consumer spending doesn’t appear to be driven by economic reopenings, the bank said in a Wednesday note.
By splitting spending by locale, JPMorgan tracked the uptrend in states without any stay-at-home orders, with orders that ended on May 18, and those with orders still in place on May 19. While economies that ended lockdowns saw the biggest gains across credit-card spending, the three categories’ trend lines remain closely grouped together through the end of last week.
The spending rebound is also concentrated in specific sectors, JPMorgan found. Consumers flocked to supermarkets immediately after lockdowns took effect, with spending in the sector nearly doubling at its late-March peak. The category has since avoided sliding into a year-over-year decline along with spending at discount stores and some other retailers. On the other hand, spending on restaurants, hotels, entertainment, healthcare, and travel “remains deeply depressed,” Edgerton wrote.
While economies are beginning to reopen throughout the US, the bank’s note also suggests a prolonged slump for in-person spending. “Card-not-present” spending, which loosely equates to online shopping, returned to year-over-year growth by late April after an initial decline. Yet spending that required in-person card use remains well below pre-pandemic levels.
The trend could forecast a gloomy future for small businesses that rely on foot traffic, as relaxed quarantine orders fail to shift spending from online vendors to physical retailers. (source)
JP Morgan is absolutely right. There is not enough credit. In fact, the problems are going to continue as unemployment rises and people get poorer.
Now is not the time to spend on non-essentials, but on things that will help a man. Think provisions, paying off debt, and making oneself ready for the future, because the economic circumstances are going to get a lot worse and people will eventually become desperate, and desperate people do not think rationally, but in the moment as they struggle to keep themselves from sinking into the economic muck that continues to engulf them.