Consumer rebounded in June but didn't offset declines from April, May: BofA's Liz Everett Krisberg

Key Concepts:

• Consumer spending rebound (June)
• Consumer cooling (not collapsing)
• Spending divergence (High vs. Low income households)
• Discretionary vs. Non-discretionary spending
• Travel spending pullback
• Restaurant spending trends
• After-tax wage growth
• Credit card delinquencies (mention only)
• Generational spending habits (mention only)

Consumer Spending Trends in June

• The Bank of America Institute's July Consumer Checkpoint report reveals that debit and credit card spending saw a slight increase of 0.2% in June.
• This rebound, however, did not fully compensate for the spending declines observed earlier in the quarter.
• Liz Kreisberg characterizes the consumer sentiment as "cooling, but not collapsing," indicating resilience with households managing their budgets and making spending decisions cautiously.

Income-Based Spending Disparities

• A significant divergence in spending patterns is observed between higher and lower income households.
• While higher income households demonstrated accelerated spending at 1.2% in June, lower income households exhibited a spending pullback. This aligns with observations of premium services like airline front cabin seats holding up while economy seats decline.

Services Spending Breakdown

• Overall services spending experienced a slight decrease of 0.1%, marking the third consecutive month of decline, a trend not seen in a long time.
• This decrease is primarily attributed to discretionary travel spending, with non-discretionary services like insurance, utilities, and rent contributing more significantly.

Travel and Restaurant Spending Analysis

• Travel spending patterns reveal that some households are completely pulling back from travel, driving the overall downturn in this category.
• In contrast, restaurant spending shows a different trend. Fewer households are dining out, but those who do are spending more per transaction and dining out more frequently.
• While rising prices contribute to increased spending per transaction, the increased frequency of dining out suggests a nuanced spending behavior.

After-Tax Wage Growth Impact

• After-tax wage growth data indicates that higher income households experienced accelerated growth for the third consecutive month, reaching just under 3%.
• Lower income households, while still experiencing wage growth, saw a deceleration to 1.6% compared to 1.8% previously.
• This disparity in wage growth is identified as a significant factor driving the observed consumption patterns.

Credit Card Usage and Generational Spending (Briefly Mentioned)

• The report also touches upon credit card delinquencies and generational spending habits, particularly focusing on millennials and Gen Z.
• The analysis suggests that younger generations entering a challenging labor market may be exhibiting distinct spending behaviors.

Conclusion

The Bank of America Institute's Consumer Checkpoint for July highlights a nuanced picture of consumer spending. While overall spending rebounded slightly in June, a clear divergence exists between higher and lower income households. Discretionary spending, particularly in travel, is declining, while restaurant spending shows a more complex pattern. After-tax wage growth disparities are identified as a key driver of these trends, suggesting a cooling but not collapsing consumer sentiment.