Consumer momentum is still moving forward, says BofA's Liz Everett Krisberg

Consumer Spending Trends: Bank of America Institute Analysis

Key Concepts:

• Consumer spending momentum
• Wage growth moderation
• Inflation slowdown (disinflation)
• Transaction growth
• High-value services spending
• Tax return spending patterns
• Credit card debt management
• Delinquency rates
• Minimum payment trends

Overview of Consumer Spending

Bank of America's Consumer Checkpoint for April indicates that consumer spending is still increasing, but at a slower pace. Debit and credit card spending was up 1% in April, compared to 1.1% in March. Despite concerns about consumers retreating, the data suggests continued momentum, albeit moderated.

Key Data Points and Trends

• Wage Growth: Household wage growth is also moderating.
  • Higher-income household wage growth was 2.3% in April, down from 2.6% in March.
  • Lower-income household wage growth increased to 1.5%, but remains near eight-year lows.
• Inflation: Inflation is slowing down, with disinflation observed in areas like gas prices.
• Transaction Growth: Overall transaction growth is slowing, particularly for high-value services like airlines and lodging.
• Three-Month Spending Growth: Three-month spending growth stands at 1.6%, suggesting positive momentum.

Impact of Tax Returns

• Tax Return Boost: Tax returns provided a temporary boost to spending. The average tax return was up slightly over 2% per household.
• Spending Patterns: Despite surveys indicating a shift towards debt repayment and savings, actual spending patterns after tax returns mirrored previous trends, with upticks in clothing, durables, and debt repayment.

Credit Card Debt and Delinquencies

• Debt Management: Consumers are not leveraging up to continue spending.
• Balance Payments: The ratio of credit cardholders carrying a balance has decreased to its lowest level in three years, significantly lower than during the pandemic.
• Delinquency Rates: 30-day delinquencies have been decreasing since October.
• Minimum Payments: The number of households making minimum payments has slightly increased, suggesting some financial stress, but remains a relatively small number.

Analysis and Interpretation

Liz Kreisberg, Head of Bank of America Institute, emphasizes the importance of data analysis to understand consumer behavior. The labor market and wage growth are key indicators. While wage growth is moderating, it still contributes to consumer spending. The slowdown in high-value services spending is notable, but overall, the data does not indicate an economy on the verge of recession.

Conclusion

The Bank of America Consumer Checkpoint suggests that while consumer spending growth is moderating, the economy is not currently in a recession. Positive momentum persists, supported by wage growth and tax return spending. Consumers are also managing their credit card debt effectively, with decreasing delinquency rates and a lower proportion carrying balances. However, the slight increase in households making minimum payments warrants monitoring.