Credit-card spending suggests economic recovery stalled out in July, JPMorgan says

• A sharp increase in consumer spending activity froze in mid-July as new coronavirus outbreaks drive fears of a longer-than-expected recession.
• Credit-card data from the week ended July 18 show spending activity pausing its uptrend and stalling down 10% from the year-ago period, JPMorgan said in a Wednesday note.
• The weakened growth suggests the strong recovery taking place at the start of the summer "has lost momentum but not reversed," Jesse Edgerton, senior economist at JPMorgan, said.
• On a more positive note, the link between decreased spending and growth in virus cases has "weakened recently," the bank added.

The once-healthy upswing in consumer spending is now running on fumes as coronavirus cases surge throughout the US and restrictions are reinstated.

Credit-card data from the week ended July 18 show spending stabilizing at levels roughly 10% below that seen in the same week last year, JPMorgan said in a Wednesday note. Card-present spending — which includes any transactions involving physical card use — stabilized at roughly -20% year-over-year. Card-not-present activity slid near a 0% change from a 10% increase.

The slowed growth suggests "that the rapid economic rebound seen in May and early June has lost momentum but not reversed," Jesse Edgerton, senior economist at JPMorgan, said.

Read more: Warren Buffett isn't warning about sky-high stocks because he 'doesn't want to make people mad,' veteran investor Bill Smead says

The flattening trendline comes as several states re-implement shutdown measures to curb the virus' spread. California reinstated a widespread lockdown last week as case counts skyrocketed. Texas and Florida have turned to less-strict measures including bars closures and mask mandates.

However, the latest reading is not entirely negative. The relationship between decreased spending and growth in virus cases has "weakened recently," the bank said. Where states with the largest virus hotspots had previously shown the biggest drop in spending, that gap is now closing.

Precautions like mask use and outdoor dining "are beginning to break the link between economic activity and virus spread," Edgerton said.

"It is encouraging to see signs like this suggesting that the US is at least getting closer to having precautions in place that would allow the economic recovery to continue without the virus spreading rapidly again," he added.

JPMorgan's report follows consumer sentiment data released Friday depicting a similar slowdown. Preliminary readings of the University of Michigan's consumer sentiment index showed the gauge wiping out recent gains as new outbreaks gripped the nation. The index fell to 73.2 from June's 78.1 reading, sliding below economists' estimate of 79.

Now read more markets coverage from Markets Insider and Business Insider:

The Paycheck Protection Program saved up to 3.2 million jobs during the coronavirus pandemic, study says

Stocks could tumble 20% to 30% on a 2nd-wave virus spike and China tensions, says one long-standing market bull

A high-growth fund manager returning 7 times more than his peers tells us how he's shifting from post-pandemic tech themes into 'real companies' — and shares 6 stock picks set to win the market's next phase