Bank of America Economist on Consumer Spending Trends by Income Bracket

Consumer Spending Bifurcation

• 📈 Data from Bank of America indicates that higher income spending growth is currently outpacing that of lower income households.
• 💡 This trend, while seemingly expected in normal times, is considered somewhat new and emerging in their data over the last few years.
• 🧩 The dynamic is attributed to the interplay between the labor market and the stock market, creating a wealth effect for higher earners and potentially less direct benefit for lower earners facing slower job growth.

Drivers of Spending Disparity

• 💰 While lower-income households are still increasing their spending, the rate of growth is significantly higher for those in higher income brackets.
• 📊 This disparity is partly explained by spending shares, where a substantial portion of overall consumption is concentrated among the top 20% of income earners.

Overall Consumer Health

• ✅ In aggregate, the consumer is described as being "fine", with healthy balance sheets and a low unemployment rate of 4.3%.
• ⚠️ Consumption is unlikely to slow down significantly unless job losses begin to accrue.
• ⚖️ Despite the overall positive outlook, there remains a clear difference in how well consumers are doing based on their income bracket, with higher-income households faring better in the current economic environment.