That data, released by the Bank of America Institute on Friday (May 9), shows that consumer spending on inessentials has been declining since the year began.
“The gradual easing in consumer spending momentum is not just due to lower inflation — the growth in the number of transactions has also cooled,” the report said.
“Consumers appear to be pulling back particularly on bigger ticket discretionary services like airline tickets and lodging.”
At the same time, nondiscretionary items continue to grow more expensive, with recent Consumer Price Index data showing increased prices for essentials like food and shelter.
“The shelter and food metrics have also been showing stickier price increases than the overall headline number,” PYMNTS wrote last week. “For example, in March, the food at home index, which is a proxy for groceries, surged by 0.5%. Shelter rose 0.2%, and at an annual rate of 4% remains one of the areas where prices are rising the most.”
Research by PYMNTS Intelligence has estimated that essential spending takes up more than 70% of a consumer’s paycheck. The PYMNTS Intelligence report “Struggling Consumers Go to Short-Term Strategies to Manage Higher Expenses” found rents have been climbing, a phenomenon mentioned by half of the respondents to our survey.
Meanwhile, the BofA report found that credit and debit card spending for all income groups is dipping, particularly among lower-income Americans.
“Some slowdown in spending growth is consistent across income cohorts since the beginning of the year, though the spending growth of lower-income households is weakest,” the report said.
The bank argued this is partly due to “relative softness” in these consumers’ after-tax wage growth. These households saw an after-tax wage gain of just 1.5% year over year in April. That’s slightly better than the prior month, though still a lower rate than the last two years, according to the bank’s deposit data.
“The financial position of most consumers appears sound. One sign of that: more consumers are paying off their credit card balances every month, according to Bank of America credit card data,” the report added.
“However, we see some increase in the share of households making only the minimum payment on their credit cards, suggesting building pressures for some households.”
