US Household Spending Jumps 4.9% as Lower-Income Groups Drive Growth
Bank of America reports a 4.9% rise in US household spending, with lower-income groups leading the growth despite dips in entertainment.
Consumer resilience continues to define the American economy. According to a recent report by Bank of America (BofA) Securities, US household spending growth remained firm through the week ending October 17, with total credit and debit card expenditures per household climbing by 4.9 per cent year-on-year.
However, a closer look at the data reveals a striking divergence in how different economic classes are spending their money. The report highlights a consistent trend over several weeks: lower-income households are recording significantly stronger spending growth than their higher-income counterparts.
The Income Divide in Consumption
The findings, based on aggregated credit and debit card transactions from Bank of America, suggest that consumption trends are no longer uniform across the US population. While overall spending is up, the momentum is being driven primarily by those at the lower end of the income spectrum, marking a distinct shift in the breadth of US consumption.
Where the Money is Going: The Big Winners
Spending patterns varied wildly across different sectors. Some categories saw explosive growth, while others struggled to maintain momentum.
- Gasoline: This category saw the most dramatic surge, with spending skyrocketing by 25.8 per cent.
- Travel: Airline spending showed strong growth, rising by 9.1 per cent year-on-year.
- Digital Commerce: Online retail spending grew by 5 per cent, outpacing the 3.1 per cent increase seen in physical retail stores.
- Dining: Spending at bars and restaurants saw a modest increase of 3.3 per cent.
- General Merchandise: This sector grew by 4 per cent.
When removing the volatile impact of gasoline, the overall card spending increase stood at 3.7 per cent year-on-year. Additionally, retail spending—excluding automobiles—rose by 3.8 per cent.
The Slump: Where Consumers are Pulling Back
Despite the overall rise, several discretionary categories have weakened, suggesting that consumers are becoming more selective about their non-essential purchases.
Entertainment and Home Goods
Entertainment spending took a notable hit, declining by 4.3 per cent year-on-year. This represents a sharp reversal from the positive growth observed earlier in the week. Similarly, spending on furniture dropped by 5.4 per cent.
Retail and Essentials
Department stores saw a decline of 3.8 per cent. Although the report noted that department stores showed the most significant improvement in growth compared to the previous week, their total spending still remains below the levels seen a year ago.
Even basic necessities saw slight dips; grocery spending fell by 0.9 per cent, while spending on clothing remained almost stagnant with a negligible increase of 0.1 per cent.
What This Means for the Future
The Bank of America report indicates that while the overall trajectory of US consumer spending remains positive, the "strength and breadth" of this consumption are uneven. The growing gap between income groups and the decline in discretionary spending like entertainment and furniture will be critical indicators for economists tracking the health of the US economy in the coming weeks.