Consumer spending is slowing down across all income levels, according to the Bank of America’s research arm.
The Bank of America Institute says consumer transactions and spending on unnecessary expenses have been waning since the beginning of the year.
“The gradual easing in consumer spending momentum is not just due to lower inflation – the growth in the number of transactions has also cooled. Consumers appear to be pulling back particularly on bigger ticket discretionary services like airline tickets and lodging.”
Data shows that since January, total credit and debit card spending across all households is contracting, with lower-income households showing the largest decline in growth rate.
“Some slowdown in spending growth is consistent across income cohorts since the beginning of the year, though the spending growth of lower-income households is weakest. In our view, this partly reflects relative softness in their after-tax wage growth. In fact, lower-income households saw an after-tax wage gain of just 1.5% YoY (year-over-year) in April, a slight improvement from the previous month, but still a lower rate than the past two years, according to Bank of America deposit data.”
The banking giant also warns that while the labor market continues to be strong, unemployment payments are on the rise.
“While the overall labor market remains very healthy, we see some signs of a rise in households receiving unemployment payments. Notably, the number of higher-income households receiving such payments in Bank of America deposit accounts accelerated to 6.1% YoY growth in April from 1% YoY in February. Meanwhile, it increased 4.1% YoY for lower-income households and 5.7% YoY for middle-income households in April.”
The report is based on aggregated and anonymized transaction data from the Bank of America.
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