With most of the country following stay-at-home orders, our spending patterns have changed—drastically. Yes, we’ve still been able to make online purchases, buy (lots of) food and booze at the grocery store, and access essentials like prescriptions and telehealth. But charging things like vacations, yacht rentals, concerts, restaurant and bar tabs, and retail therapy? Simply not happening at the moment.
To investigate how much things are changing, JP Morgan Chase conducted and has now published its Initial Household Spending Response to COVID-19. The company took a sample of 8 million families across all 50 states who have been active users of their Chase credit cards since January 2018 and looked at their spending changes from March through April 11, 2020, compared to the previous year. They further broke down the sample by income levels and industry of employment to see if that has played a role in spending changes. As per JP Morgan Chase, the main finds of this short-term study are as follows.
The headline finding is that “average household credit card spending had fallen by 40 percent year-over-year by the end of March 2020.” More specifically, “Spending on essentials initially spiked 20 percent before falling to below pre-pandemic levels, while spending on non-essentials declined by 50 percent and accounted for nearly all of the total spending decline.”
When analyzing the data by income levels, Chase found that “spending dropped substantially for households across the entire income distribution, with slightly larger drops for higher-income households.” For purposes of this study, Chase designated income quartiles as Quartile 1: less than $39,200; Quartile 2: $39,200–$58,900; Quartile 3: $58,900–$91,800; Quartile 4: greater than $91,800. For the time period of March 13, 2020 (when the national emergency was declared), to April 11, 2020, spending decreased by 43.07% by those in Quartile 4 versus 38.61% by those in Quartile 1.
Next, when looking at the data by type of employment, Chase found that “spending dropped dramatically for workers in all industries of employment.” Interestingly, the greatest drop was for professionals (44.89%) and the lowest drop in spending was for government workers (35.49%).
While Chase used a number of different personal credit cards in this study, it’s reasonable to surmise based on the data that its highest end product, the Chase Sapphire Reserve card, likely took the greatest hit. We look forward to the next study and what it reveals. On the one hand, since everything remained shut throughout April and most of May, spending should continue to decline. Long-term job security has become a big issue, and people are likely to hold on to what they have. That said, unemployment income, stimulus payments, and government relief may add boosts to spending (on top of movement from phased re-openings).
While Chase has not indicated when it plans to release its next study, the company has stated that “[i]n future work we will continue to track the path of consumer spending and evaluate the extent and impact of income disruptions by extending and complementing our current view of credit card spending… .” We shall keep you posted!