The curious story behind the pandemic's weirdest chart

Consumer spending is the backbone of the US economy and accounts for some two-thirds of economic activity. So if Americans aren't using their credit cards, that's a bad sign for the recovery, even though the percentage of credit cards that are delinquent has also gone down.

The Federal Reserve reports that credit cards and other revolving lending plans offered by America's commercial banks totaled $733 billion on a seasonally adjusted basis in the week ended February 3.

By comparison, the same debt measure stood at nearly $846 billion in January of last year. Apart from the first quarter, it declined in every quarter in 2020.

Holiday spending was disappointing in 2020. Even though Americans shopped more online, overall spending fell between October and December, and the decline is seeping into 2021 as well.

Spending remained soft "with the last-minute, in-person holiday shopping rush looking especially weak," said JPMorgan senior economist Jesse Edgerton.

No surprise, then, that US retail sales declined for a third-straight month in December. Economists believe the trend reversed in January and predict a 1.1% monthly increase. The next retail sales report is due to be released Wednesday at 8:30 am ET.

Plus, the second round of stimulus checks should soon start to arrive in American's bank accounts, and that could reignite spending, Edgerton said.

Economists at Morgan Stanley predict credit card loan growth for larger US banks will decline by 1.2% in 2021, a slowdown from last year's drop of 6.4%.

"We expect economic activity to begin ramping up around March and become more robust over the course of the year as the cloud of Covid thins," the economists said in a note.

The recovery is k-shaped

The pandemic has upended life as we knew it and changed consumption patterns. More importantly, it has changed consumer behavior in different ways for different groups.

So far, the recovery from the pandemic crisis has been largely k-shaped. Millions of Americans lost their jobs and still have to rely on government aid to make ends meet.

Meanwhile, those who happen to work in sectors more shielded from the pandemic-induced slowdown haven't seen their personal finances collapse. On the whole, those Americans' personal savings rates have gone through the roof because they spent less money outside the home.

But money in the bank doesn't help the US economy very much, and a lot of the recovery will depend on how much of those nest eggs consumers spend this year: a buying frenzy could push up inflation too quickly, while gradual spending might be just what the doctor ordered.

Beyond the falling credit card balances and high savings rates, US consumers did spend money last year.

For example, 2020 was a big year for car sales, as travel restrictions and working from home prompted many consumers to buy a vehicle. Car loans have been rising steadily and reached $468 billion in the week ended February 3, the Fed reports.

Real estate has also been hot, as ultra-low mortgage rates are turning up the heat in the housing market. For some prospective home buyers this means it's a great time to lock in a good rate, while for many others home prices have been driven up so far that it's still not affordable to buy despite the record the low lending rates.

The bottom line is that the k-shaped story line will persist until the recovery is more broad-based. That's when we might see a change in credit card debt as well.