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Data suggest Central Valley consumers have money to spend — but will they?

Car Sales

A salesman assists a customer at BMW of Bakersfield.

New data suggest Central Valley consumers were able to sock away enough cash during the pandemic to help fuel a robust economic recovery later this year — good news for local businesses assuming, as other reports suggest, Americans are getting ready to part with some of their recent savings.

Figures released this week say deposits at the region's credit unions jumped 24 percent to reach a record $12.2 billion in the 12 months in 2020. Much of that money likely represents federal stimulus payments.

Economists said the numbers point to at least the ability of consumers to spend money in ways that could help lift local economies hurt by business inactivity during the pandemic. That's a big reason why stimulus payments were given out: equip people to shop at local businesses.

Important factors coming together now that could help spark more consumer spending, they said, are historically low interest rates and continued loosening of business operating restrictions as COVID-19 infection rates gradually decline.

"All the pieces of the economic pie are sort of coming together to boost economic growth," said Robert Eyler, president of Economic Forensics and Analytics in Petaluma.

Another, less optimistic way of viewing the same numbers is that the jump in savings last year shows consumers were nervous about spending money during the coronavirus crisis and that it remains to be seen how long their hesitation will last.

Cal State Bakersfield economist Richard Gearhart saw indications in the data released Monday that, as 2020 drew to a close, Central Valley residents weren't terribly hopeful that the economy would rebound quickly. He noticed they paid down debt overall and largely avoided buying vehicles, which would have been a sign of strong consumer confidence.

But there's a bright side to that, too, he said by email.

"I think people are probably going to be cautious about drawing down their cash reserves, but that's better for the long-term growth here," he wrote, explaining that frugality can increase the local economy's stability.

Monday's fourth-quarter summary from the California Credit Union League noted many federal relief checks sent to customers who were employed remained unspent as of late December in the Central Valley. The data was aggregated across the counties of Fresno, Inyo, Kern, Kings, Merced, San Joaquin, Stanislaus and Tulare.

First mortgages placed with credit unions in the region reached a record of $2.2 billion, an increase of 15 percent year over year, the credit union league reported. It noted business loans were up 17 percent at $260 million.

Meanwhile, credit-card lending dropped 13 percent, the group said, and other forms of borrowing were also off: new auto loans (-7 percent), used auto loans (-4 percent) and home equity loans (-3 percent).

The biggest share of deposits, 36 percent, went to checking accounts, followed by savings accounts (28 percent), money market accounts (16 percent) and certificates of deposit (7 percent).

That data has come amid economic indicators supporting the notion U.S. consumers are ready to start shopping again.

The Conference Board Inc., a nonprofit business and research group, on Tuesday reported its consumer confidence index climbed 21 percent in March to hit 109.7, blowing past economists expectations by more than 15 points.

That release followed less than a week after the University of Michigan said its own consumer confidence gauge rose 10.5 percent in March to reach 84.9, its highest reading in a year. Economists had been expecting an increase of less than 9 percent.

Eyler said it's too early to know what consumers will do but that with interest rates low and government lifting some restrictions on gathering, he expects the second and third quarters of this year will see people return to their earlier shopping habits.

Even so, he said the jump in deposits shows it's less a question of whether the money will be spent but when. If it doesn't provide a benefit in the next few months, the said, then it'll have the same positive effect sometime later.

"It's a short-run versus long-run issue," Eyler said.

Gearhart described a similar scenario but said he thinks "a fraction of this will be spent" in the near term.

"My issue with the savings and checking increase is that (consumers) could stimulate the economy in the next few years, but I imagine people will hold more cash in reserve because of COVID," he wrote.

He also observed that, with relatively little money spent on buying vehicles, Central Valley consumers appear to have opted for goods that bring relaxation and comfort instead of signing a new car loan that they'd have to pay off over a number of years.

Although that could be a good thing given local residents' habit of overextending themselves to get a nice car, he said, credit union members' hesitation to take on that kind of debt "probably suggests that they expect a slow return to normal."