Bank of America Institute: Consumer Spending Momentum Continues Despite Moderation

Consumer Spending Trends

• 📊 Consumer spending in April increased by 1%, a slight moderation from 1.1% in March, indicating continued momentum.
• 💡 Despite commentary about consumers retreating, data shows consumer momentum is still moving forward at a moderate pace.
• ⚠️ Spending growth is slowing, particularly for high-value services like airlines and lodging, but overall economic indicators do not suggest a recession.

Household Financial Health

• 💰 Most households maintain a solid financial condition, supported by ongoing wage growth.
• 📈 Higher-income households saw wage growth of 2.3% in April (down from 2.6% in March), while lower-income households saw a 1.5% increase.
• 📉 Inflation is slowing, with disinflation observed in areas like gas prices, contributing to moderating spending.

Impact of Tax Returns

• 🧾 Tax returns in April provided a temporary boost, with average returns up over 2% for households.
• 💸 Contrary to some survey expectations, data shows consumers spent tax return boosts on clothing, durables, and paying off debt, rather than significantly altering behavior.
• 💳 The ratio of credit card balances being carried has decreased to its lowest level in three years, indicating reduced reliance on credit.

Debt and Delinquency Rates

• 📉 30-day delinquencies have continued to decrease since October, signaling improved payment behavior.
• ⚠️ While a small uptick in households making only minimum payments was observed, it remains a relatively small number, suggesting limited widespread financial stress.
• ✅ The overall consumer behavior, based on spending, debt levels, and delinquencies, does not point to an economy in recession.