While this cohort’s spending lagged the average over the pandemic, there are signs of a catch-up at the start of 2023.
* Bank of America credit and debit card spending per household by middle-income consumers lagged the average over the pandemic. Their discretionary spending was particularly soft, with limited access to service sector activities as one explanation.
* However, there are signs of a catch-up at the start of 2023, with middle-income services spending looking fairly solid — and perhaps enjoying a good meal out once more.
* Can this persist? Well, the Bank of America Propriety Market Landscape Insights Study suggests middle-income consumers feel fairly confident near-term and still have financial buffers to draw on should economic headwinds start to blow harder.
Small Business Checkpoint is a regular publication from Bank of America Institute. It aims to provide a real-time assessment of small business spending activities and
financial well-being, leveraging the depth and breadth of Bank of America’s
proprietary data. Such data is not intended to be reflective or indicative of,
and should not be relied upon as, the results of operations, financial condition or
performance of Bank of America.
* Regional bank failures have sparked concerns of a significant tightening of credit conditions for small businesses. How worrying is this?
* The good news is that latest Bank of America internal data suggests that small businesses, including those in California, saw little interruption to their operations in March, with spending growth in line with recent trends. Notably, payroll spending growth ticked up even as wage inflation decelerated in March, pointing to resilient small business hiring despite the uncertainties.
* In our view, banks had already started to tighten lending conditions in 2022 and recent developments point to a continuation rather than acceleration of this trend. Tighter credit could eventually weigh on business activity but we note that small businesses still rely more on larger banks for credit, and C&I loan growth at these banks has remained intact so far.
Consumer Checkpoint is a regular publication from Bank of America Institute. It aims to provide a holistic and real-time estimate of U.S. consumers’ spending and their financial well-being, leveraging the depth and breadth of Bank of America proprietary data. Any such Bank of America proprietary data is not intended to be reflective or indicative of, and should not be relied upon as, the results of operations, financial conditions or performance of Bank of America.
* After a strong start to the year, Bank of America credit and debit card spending per household moderated further in March, to 0.1% year-over-year (YoY), the slowest pace since February 2021. Sequentially, card spending per household fell 1.5% month-over-month (MoM), seasonally adjusted.
* In our view, slowing wages, a drag from lower tax refunds, and the expiration of Supplemental Nutrition Assistance Program (SNAP) emergency allotments are driving the slowdown. Bank of America data shows after-tax wage and salaries growth slowed to just 2% YoY, down from the peak of 8% in April 2022. Meanwhile cumulative tax refunds are tracking around 10% lower than last year.
* How concerned should we be about spending going forward? The good news is that consumers still have financial buffers as suggested by lower credit card utilization rates compared to 2019. However, signs of a cooling labor market and a sustained deceleration in wages could tilt the risks to the downside.
