Checking Account Balances As An Indicator Of Consumer Confidence

U.S. consumers are keeping more money in their checking accounts than at any time in the last 27 years, and one firm says that could be a bad sign for the economy. It also contradicts the current Consumer Confidence report from the Conference Board.

Independent research firm Moebs Services has been analyzing checking account balances for over 25 years. According to the firm’s research, at the end of 2017, the average checking account customer has over $3,700 in their account. That is the highest level since the company started tracking this data.

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The company also pointed out that checking account balances have increased in 23 of the last 30 quarters. The lowest average balance in since 1991 was in 2007, just before the market and economy tanked during the financial crisis.

Moebs uses the $2,263 level as a demarcation point about how consumers feel about the economy. Michael Moebs, an economist and Chief Executive at the firm bearing his name, stated that, “Anything lower than this signifies the economy is doing well. Anything above this indicates the economy is not doing well.”

This research runs counter to what we are seeing from the Conference Board’s Consumer Confidence Index which has been moving higher and higher in recent years. The overall total has been above the 125 level for the last three months. This is the first time since 2001 the index has maintained that high of a reading for that long.

I wrote a piece last week about Consumer Confidence where I pointed out that you need to keep an eye on the report and take note when the index starts dropping. From a contrarian viewpoint, the fact that individuals are keeping more money in their checking accounts could be a good sign. Markets don’t tend to top when individuals are showing concern about the economy.

There could be an entirely different factor at work that is causing checking account balances to be higher. Many banks have raised the levels customers have to keep in their account in order to avoid fees. Perhaps bank customers got tired of incurring fees and decided to maintain higher balances to avoid the fees.

The next Consumer Confidence report won’t come out until May 29. Of course I will be watching to see if it goes up or down and by how much. I personally have more confidence in the reliability of this report than I do the checking account information. But it is interesting to analyze.

About Rick Pendergraft

Rick has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick’s analysis process includes fundamental, sentiment and technical analysis. Rick started college as an education major, wanting to teach economics, but eventually changed to majoring in Economics and received a Bachelor of Science in Economics from Wright State University. His desire to inform and educate people is at the heart of his writing.

One comment

  1. Bill Bornemann

    Perhaps consumers have more cash on hand then they realized because of tax cuts and tax refunds. They
    haven’t gotten around to spending the extra cash. Many boomers I know as well as their children are
    more interested in saving to buy an experience or travel instead of buying more stuff. Many 20 somethings are moving to the cities after graduation and don’t own cars, but rely on UBER or public transit.

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