Americans may still have more money in their bank accounts than they did before the COVID-19 pandemic struck, but they are rapidly spending down those balances because they are at their lowest point in three years, according to data released yesterday by JPMorgan Chase. which analyzed the bank accounts of its 9 million customers.
The data is potentially one explanation why the economy has not dipped into the recession that many economists predicted: because consumers have been able to use their savings to continue spending despite rising inflation making everything more expensive and rising interest rates making it more expensive to borrow money or get credit.
The average bank account balance for individuals in the highest income quartile was about $9,000 in March 2023, compared with $10,700 in March 2022. For those in the lowest income quartile, the average bank account balance was $1,300 in March 2023, compared with $1,400 in March 2022.
“Obviously there was a huge public health event and unprecedented federal response that landed a lot of money in peoples’ bank accounts,” said Chris Wheat, president of the JPMorgan Chase Institute, a think tank within the country’s largest bank, in a published report. “From the perspective of an individual household, 2020 is getting farther in the rearview mirror, but you still remember what it was like to have a bigger balance. That feeling of ‘I have less’ has certainly intensified, in part because of inflation.”
Bank account balances peaked in April 2021 for consumers across all income levels, and have been steadily decreasing since then, although they are still above where they were in January 2020. Interestingly enough, consumer confidence spiked in July to its highest level in 18 months, thanks largely to the slowdown of inflation. The slowdown in inflation has allowed earnings to catch up — hourly wages are up 4.4% in the past year, compared with a 3% increase in prices.