The Washington Post has a story about how, “Despite a year when inflation pushed prices to new heights, Americans are still better off now than before the pandemic, with nearly 10 to 15 percent more in their bank accounts than in 2019.”
According to the story, new checking and savings account data indicates, however, that “households are rapidly spending down that extra cash they’d socked away during the pandemic. Median account balances are at their lowest levels in roughly three years and have dropped as much as 41 percent from their peak in April 2021, when Americans were flush with government stimulus money and tax returns, according to a JPMorgan Chase Institute analysis of the bank accounts of 9 million Chase customers.
“Taken together, the data helps explain the big mystery behind how the U.S. economy has managed to avoid a recession that many economists had forecast: Consumers, supported by a strong labor market, have been able to keep spending despite inflation and a sharp rise in borrowing costs.”
The declining balances point to “why Americans remain tentative about their economic prospects, particularly as they face higher prices on food, housing and travel,” the Post writes. “Many have been working through their savings and say their bank account balances are on a downhill trajectory, with little prospect of building them back up to where they were a year or two ago.”
The two-steps-forward-one-step-back nature of the economy is underlined by a Bloomberg story about how May “US retail sales rose by less than forecast, while an underlying measure of household spending pointed to a more resilient consumer at the end of the second quarter.
“The value of retail purchases rose 0.2% in June after an upwardly revised 0.5% increase in May, Commerce Department data showed Tuesday.”
KC’s View:
The thing is, despite the doomsayers, the economy has not crashed into recession (though there are a lot of folks with a recessionary mindset, which becomes a self-fulfilling prophesy) and inflation is as low as it has been for two years (though that is cold comfort to folks who are having trouble making ends meet). Americans, apparently, are more optimistic than many prognosticators would have expected, though I do think that the recovery could be a house of cards that could be scattered by a stiff wind created by any number of outside and uncontrollable circumstances.
To me, within the lanes generally navigated by MNB, what this all suggests is that there are opportunities that can be exploited by retailers that are interested in appealing to people’s aspirational impulses. If people are guardedly optimistic, this likely means that they are interested in affordable, accessible luxuries. That can mean unique and specialty foods, made available by retailers who understand that these items can play a unique role in the lives of their shoppers and even create extended and deeper relationships with customers.
It doesn’t even have to be fancy. It can be a better burger, or a piece of fish, promoted with a recipe and maybe a good bottle of wine that are part of an effort by the retailer to reset and control the narrative.
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