Bank of America Institute: Consumer Spending Rebounded in December Despite Economic Headwinds

December Consumer Spending Rebound

• 📈 The Bank of America Institute's December data shows a rebound in consumer spending, bouncing back from a flat November.
• 💳 Year-over-year credit card spending increased by 1.8%, a notable rise from the previous month's 1.3%.
• 📊 Seasonally adjusted month-over-month spending was up half a percent, recovering from a flat performance in November.

Shifting Consumer Behavior

• 🛍️ Consumers are adapting by focusing on smaller ticket items like general merchandise and clothing, rather than big-ticket durables.
• 💡 This shift indicates a behavioral change in consumers, driven by transaction volume rather than just rising prices.
• 🛒 The trend suggests a divergence in retail performance, favoring sectors with lower-priced goods.

Income Disparities in Spending

• 💰 The higher-income consumer continues to spend and grow their spending at a significantly faster pace (2.4%) compared to the lower-income consumer (0.4%).
• 📊 This spending gap has been consistent for the past six months, indicating a steady divergence rather than a K-shaped recovery.
• 🚗 An analogy of an "alligator mouth" was considered to describe the widening gap, though a more fitting analogy is still being developed.

Labor Market Insights

• 🧑‍💼 Bank of America's data indicates an increase in the number of households receiving paychecks, with an uptick from 210 in November to 610 in December.
• 📉 Conversely, the number of households receiving unemployment income has shown a steady, but not accelerating, pace of growth (up about 10% over three months).
• ⚖️ The labor market is characterized by a "low fire" environment, with an increase in hiring but not a rapid acceleration.