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Axios
2 days ago
- Business
- Axios
The economic party rolls on for the rich. For everyone else, not so much
Rich Americans are spending at a higher rate this year — everyone else is basically slowing their roll. Why it matters: New data makes clear that while the good times continue for higher-income earners — strong wage growth, less debt — lower-income Americans are under increasing financial stress. By the numbers: Spending increased nearly 2% in July from last year for higher income households, and 1% for middle-earners, according to a Bank of America Institute analysis released earlier this week. For the lowest third of households, those earning roughly $50,000 a year or less, spending growth was zero, zip, zilch, nada — 0.0%, per the analysis, which looked at internal credit- and debit-card spending data from BofA. Wage growth is slowing at the bottom, too. Up just 1.3% in July from last year, according to the bank's after-tax wage and salary data. That's compared with 3.2% for higher-income households, those earning above $120,000 a year. The big picture: For a few years after the pandemic, low- and middle-income Americans came out ahead — able to pay down debt with increased government support, and fast-growing wages courtesy of a hot labor market. For a time, pay rose faster at the bottom of the income scale than at the top. Those days are in the rearview mirror, as the WSJ recently pointed out. Data from the Atlanta Fed shows that wage growth among the bottom quarter is now slower than at the top — reversing the pandemic-era trend. Where it stands: The Boston Fed looked at even more credit card data for an analysis out Wednesday. It found spending has grown only modestly for the lowest earners — while it is still climbing sharply for those earning more than $120,000. At the same time, they found credit card debt is now back above pre-pandemic levels for low- and middle-income groups. Those at the high end? They've got room to run. Debt is still below 2019 levels. And their spending is propping up the economy, the report concludes — following similar research from Moody's. Zoom out: Consumer spending is the 800-pound gorilla when it comes to the American economy — making up nearly 70% of GDP. And lower earners already do much less of it — the lowest 30% of households by income account for less than 15% of overall U.S. consumer spending, according to government data cited by BofA. Reality check: That means, the spending slowdown at the lower end is less likely to stall the economy — that is, if the rich and middle-income earners keep spending. And, overall the economy is still holding up, and spending in the aggregate increased in July, per BofA. "If middle income households keep their heads above water, as they seem to be at the moment, then the overall picture for the economy is fairly solid," says David Tinsley, senior economist at the BofA Institute. What to watch: The monthly government report on retail sales will be out later Friday morning. It should provide more details on how American consumers are spending. Meanwhile, there are more headwinds on the horizon for lower earners. Tariff increases are particularly painful — as this is a group that spends a larger share of income on goods, i.e., the stuff that is more exposed to tax increases on imports. And the cuts in health programs and social services included in the "big, beautiful bill" will make them poorer, as a new Congressional Budget Office analysis pointed out earlier this week.
Yahoo
2 days ago
- Business
- Yahoo
The gap between higher- and lower-income households is widening as inequality progress since pandemic has ‘gone into reverse,' BofA economist says
America's consumer economy showed renewed signs of strength in July, but the gains are not being shared equally. According to Bank of America Institute's latest report, Consumer Checkpoint: Gains and Gaps, higher-income households are enjoying accelerating wage growth and increased spending, while lower-income households face slowing pay gains and flat expenditure—marking the widest such divide in more than four years. The institute's research, based on aggregated and anonymized deposit and transaction data, reveals that after-tax wages for the lowest-income tercile grew just 1.3% year over year (YOY) in July, down from 1.6% in June. In contrast, higher-income wage growth accelerated to 3.2% YOY—its third consecutive monthly increase. The result is the biggest gap between top and bottom earners' wage growth since February 2021—a warning sign for the economy despite a strong overall spending picture. Bank of America Institute senior economist David Tinsley told Fortune in an interview: 'In some sense, we had an improvement in lower-income wage growth since the pandemic, and now that's gone into reverse.' Coming out of the pandemic was a 'very unusual situation,' Tinsley added, and lower-income households genuinely did see stronger wage growth than other areas of the economy. 'There was a narrowing of wealth inequality, and now it's widening,' Tinsley said, though cautioned it was 'early days.' Still, when he looks at what's happening to higher- and lower-income Americans, he says, 'the divergence is quite stark.' Overall consumer activity picks up Tinsley emphasized the overall consumer picture is 'fairly healthy,' and his team's research on the latest data shows total credit and debit card spending per household rose 1.8% YOY in July, the fastest pace since January. On a seasonally adjusted basis, spending climbed 0.6% month over month (MOM), following a 0.4% gain in June. Notably, the rebound was broad-based, as services spending surged 0.9% month over month, the strongest increase since April 2024, after three straight months of declines. Retail spending (excluding gasoline and restaurants) also edged higher, though part of the lift came from temporary factors such as extended Prime Day–style online promotions and a late surge in back-to-school shopping. Tinsley and his team cautioned these boosts may fade. Some of July's uptick may reflect 'buy-ahead' behavior linked to the Aug. 1 trade-deal deadline, as consumers sought to avoid potential tariff-related price hikes. Overall, temporary promotional spikes and inflation pass-through from tariffs complicate the picture. Retail transaction volumes rose more modestly than spending values, hinting higher prices, rather than greater quantities, may have driven part of the increase. The widening wage gap tracks closely with labor market shifts. Recent Bureau of Labor Statistics revisions show a sharp slowdown in payroll growth in the second quarter of 2025, with the biggest step-downs in low-wage industries such as retail, wholesale, leisure, and hospitality. Bank of America deposit data indicates only a modest 4% year-over-year rise in the number of lower-income households receiving unemployment payments, compared with 10% increases among middle- and higher-income households. This suggests low-wage workers are not losing jobs in large numbers, but are instead facing reduced hours or muted pay growth. Spending divergence now clear-cut The spending data mirrors the pay trends. 'Lower-income households aren't really spending,' Tinsley told Fortune, finding that their spending growth was flat (0% year over year) in the three months to July. Higher-income households posted 1.8% year-over-year growth, with middle-income households up 1.0%. While the lowest-income 30% of households account for less than 15% of total U.S. consumer spending, their purchases matter for sectors dependent on high transaction volumes, such as discount retail, quick-service restaurants, and budget travel. More important, Bank of America's internal data shows the share of lower-income spending devoted to discretionary categories has barely changed since last year, suggesting they have not yet resorted to cutting nonessentials—but their capacity for future cutbacks remains small. No early signs of consumer distress—yet One potentially reassuring takeaway is the absence of typical distress indicators. Retail returns are not rising—the downtrend that began in 2022 has merely flattened, while deposit balances remain above 2019 levels even after adjusting for inflation, and credit card borrowing habits remain healthier than pre-pandemic. However, beneath these broad measures are hints of strain: Among lower-income households that do carry month-to-month card balances, credit card utilization rates have risen faster than in other groups since 2019. Even with slower wage growth at the bottom, the institute concludes household finances overall remain 'sound.' Continued elevated savings, relatively low revolving credit usage, and stable borrowing capacity suggest consumers still possess spending firepower—a key factor supporting the economy's resilience so far this year. That said, the report notes middle- and higher-income households are doing much of the heavy lifting. As Tinsley's team observed: 'From a macroeconomic perspective, it is reassuring that middle- and higher-income households' spending growth does not appear to be weakening like it has for lower-income households,' noting the lowest 30% of households by income account for less than 15% of overall U.S. consumer spending. Still, the team added, 'there are broader socioeconomic concerns around any slowdown in lower-income households' wages and spending.' When asked by Fortune to expand on these broader socioeconomic concerns, Tinsley said: 'There's some time to go before this becomes really telling.' He estimated the economy is at least a year or maybe as much as 18 months away from truly reversing all the progress on wealth inequality that was seen coming out of the pandemic, but he said there's no doubt about it. The widening wealth inequality picture 'creates complexities going forward.' Key July 2025 figures: Total card spending per household: +1.8% YOY (fastest since January) After-tax wage growth (lowest-income tercile): +1.3% YOY After-tax wage growth (highest-income tercile): +3.2% YOY Card spending (lowest tercile): 0% YOY Card spending (highest tercile): +1.8% YOY Services spending: +0.9% MOM (largest since April 2024) For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. This story was originally featured on
CNBC
5 days ago
- Business
- CNBC
Seeing really positive consumer spending from both retail and services: BofA's Liz Everett Krisberg
Liz Everett Krisberg, head of Bank of America Institute, joins 'Squawk Box' to break down the Institute's July Consumer Checkpoint Report, which provides real-time consumer spending and financial health estimates.
Yahoo
17-07-2025
- Business
- Yahoo
The economy enters its budget shopping era, with consumers doubling down on value even as they ramp up spending
Retail spending growth in June shows consumers are still opening their wallets, but an uncertain economic environment means they're increasingly picky about where their money goes as they try to stretch dollars further. A consumer spending surge last month shows that tariffs haven't quite killed the American shopper's need to spend. Retail spending grew at a healthy pace of 0.6% in June, and core spending—a category excluding volatile sectors like gasoline—grew 3.9% from the year before. But under the surface, there are signs of stress. Shoppers are still opening their wallets, yes, but they're taking a much choosier approach to spending—cutting back on many nonessentials and hunting for deals on unavoidable purchases. A recent Bank of America Institute note spotted a contradiction: While data shows customers increasing spending at restaurants recently, when surveyed, shoppers said they actually cut spending on dining out. They explain this by deal-hunting: Diners still went out, but scaled down the types of restaurants they visited to get more bang for their buck. '[C]onsumers do not necessarily dine out less during downturns, but rather they shift to cheaper restaurants,' BoA wrote. 'We are seeing a continuation of the consumer selectivity that typically characterizes times of economic uncertainty. Specifically, some consumers appear to be seeking out perhaps fewer, but more meaningful experiences,' the research found. A similar trend is playing out in the grocery aisle, with consumers shopping more frequently but spending less money per trip, 'meaning it's likely people are shopping more selectively to get the best bargains,' BoA wrote. So while the average American consumer is still spending, they're getting pickier about where the money goes—cutting back to just the necessities, where possible. In an overall strong month where spending expanded across most retail categories, spending fell for furniture, electronics, and appliances—categories that are starting to feel a price hit from tariffs. The just-ended Amazon Prime sales event also showed hints of consumer stress. Sales during the four-day event this year grew 30.3% from the year before, according to Adobe, but much of the growth was driven by discounts, as the 'consumer remains price sensitive.' The use of buy-now-pay-later also rose, as shoppers looked for 'more flexible ways to manage their budgets,' according to the data provider. Above all, Prime shoppers 'prioritized essentials like dish soap and paper products over big-ticket purchases,' the Associated Press reported, citing consumer-data provider Numerator. The hunt for bargains has even expanded into the luxury space. According to eMarketer, over a quarter of U.S. adults in a recent survey said they've cut back spending on luxury goods, but the same portion says they've bought refurbished or used luxury items. '[T]he takeaway is clear—even luxury buyers are feeling the pinch,' the outlet wrote, advising retailers to 'emphasize value, investment-worthy quality, and exclusivity' in marketing. As shoppers grow increasingly price-conscious, a surge in inflation could take a further bite out of that confidence. Consumer prices in June rose at a 2.7% annual rate, speeding up from May, the Labor Department previously reported. For now, a healthy job market with low unemployment is still keeping the floor under spending, Heather Long, the chief economist at Navy Federal Credit Union, said in a statement to the AP. 'There's still a lot of trepidation about tariffs and likely price hikes, but consumers are willing to buy if they feel they can get a good deal,' she said. This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
10-07-2025
- Business
- CNBC
Consumer rebounded in June but didn't offset declines from April, May: BofA's Liz Everett Krisberg
Liz Everett Krisberg, Head of the Bank of America Institute, joins 'Squawk Box' to discuss the state of the American consumer, the impact to income groups and much more.
