Seeing really positive consumer spending from both retail and services: BofA's Liz Everett Krisberg

Key Concepts:

• Consumer spending trends
• Year-over-year growth
• Seasonal adjustments
• Retail vs. services spending
• Impact of online promotions (Prime Day)
• Tariff buy-ahead
• Inflation
• Unemployment income
• Wage growth across income levels
• Spending patterns by income level

Consumer Spending in July: A Detailed Analysis

1. Overall Spending Growth:

• Bank of America Institute data indicates consumer spending rose again in July, up 1.8% year-over-year.
• With seasonal adjustments, spending is up 0.6%, offsetting declines seen in April and May.
• Both retail and services sectors contributed positively to this growth.

2. Services Sector Rebound:

• Services spending experienced a significant rebound, increasing by 0.9%.
• This is notable because services spending had declined for three consecutive months in June, the first such occurrence since 2008.

3. Retail Spending: Cautious Optimism:

• While retail spending grew, the growth was tempered, increasing by only 0.2% compared to 0.4% in June.
• Temporary factors like extended Prime Day promotions (four days instead of two) and back-to-school shopping contributed to the July figures.
• The potential for tariff buy-ahead in anticipation of an August trade deadline also influenced spending patterns.

4. Tariff Impact:

• The speaker suggests that the July spending patterns might be similar to those observed in March, driven by consumers buying ahead of anticipated tariffs.
• The recent 90-day reprieve from China on tariffs could lead to different spending behavior in the coming months.

5. Inflationary Pressures:

• While the data doesn't provide specific basket size details, the growth in retail spending outpaced the growth in transactions.
• This implies that the cost of goods is increasing, indicating inflationary pressures.

6. Employment and Income Dynamics:

• The unemployment rate remains low, described as "Goldilocks."
• The number of households receiving unemployment income is growing, with a higher growth rate among middle-income households (10% or higher) compared to lower-income households (4%).
• Wages are still increasing across all income levels, with acceleration observed for higher and middle-income earners.
• However, wage growth for lower-income earners is at its lowest level since 2017 (1.3%), widening the income gap.

7. Spending Patterns by Income Level:

• Spending among lower-income households was flat, while higher-income households primarily drove the overall spending gains.
• This divergence highlights the widening gap between income groups and their respective spending behaviors.

8. Bank of America Data Nuances:

• While Brian Moynihan reports overall spending trends within Bank of America, Everett Kreisberg focuses on per-household spending to provide an apples-to-apples comparison, accounting for market share fluctuations.

Synthesis/Conclusion:

The July consumer spending data from Bank of America Institute presents a mixed picture. While overall spending is up, driven by a rebound in services and temporary factors in retail, there are underlying concerns. Tempered retail growth, potential tariff-driven distortions, and inflationary pressures warrant caution. Furthermore, the widening income gap and stagnant spending among lower-income households suggest that the benefits of economic growth are not being evenly distributed. The data suggests a need for careful monitoring of spending trends in the coming months, particularly in light of the tariff situation and evolving income dynamics.