Outside of basic purchases like groceries, gas and clothes, Americans earning over $125,000 annually are continuing to reel in credit and debit card spending for the third month in a row, according to a study by the Bank of America Institute.
Spending by those in higher income brackets fell by about 0.5% in July, the data showed, with consumers curtailing travel expenses like airplane tickets and hotel bookings. Lower-earning groups spent about 10% more on travel lodging than normal.
Higher earners spent less during the back-to-school time period on clothing, although they spent more on jewelry during the busy wedding season, per the report.
“After nearly two years of strong consumer spending growth led by the lower-income consumers, the higher-income consumers picked up steam this year as they unleashed pent-up demand for services spending. However, with rising inflation and financial market volatilities, there are growing concerns around a major slowdown in spending for those that are more affluent,” according to the report.
While gas prices dropped in July and August, the freed-up cash was less noticeable for higher-income households. For households earning over $125,000 a year, gas spending as a share of total card spending only dropped by 0.5% in mid-August from the peak in early July.
“Both higher and lower income consumer spending is crucial to the overall US economy. On the one hand, the lower income households’ spending can have a bigger impact on the rate of change for overall consumer spending given their higher marginal propensity to consume (MPC, i.e. proportion of income that is spent instead of saved),” Bank of America said in its report.
However, it did note that “higher income households take up a much bigger share of overall consumer spending.”
According to data from the Bureau of Labor Statistics cited by the report, “Spending from the highest 20% income quintile made up nearly 40% of total consumer spending in the US in 2020,” highlighting the importance of understanding various income groups’ spending habits.