Consumer Checkpoint: No underlying leaps in February

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Consumer Checkpoint

No underlying leaps in February

11 March 2024

Key takeaways

• Total card spending per household rose 2.9% year-over-year in February, according to Bank of America internal data. However

this strength largely reflected the extra day due to the leap year. On a seasonally adjusted basis, spending rose 0.4% month-

over-month, rebounding from the drop of 0.3% in January. Overall, consumer spending momentum appears soft, but stable.

• Lower-income households' spending growth appears to have slackened. This could partly reflect some loss of momentum at the

lower end of the labor market. Higher-income households' spending remains weak, but is stronger at the very top end (income

above $600K).

• We see a continued rise in the proportion of households using 'buy now, pay later,' but at a much slower pace. Our latest data

shows adoption has slowed across all income groups, but particularly in higher-income households.

Consumer Checkpoint is a regular publication from Bank of America Institute. It aims to provide a holistic and real-time estimate of US

consumers’ spending and their financial well-being, leveraging the depth and breadth of Bank of America proprietary data. Such data is not

intended to be reflective or indicative of, and should not be relied upon as, the results of operations, financial conditions or performance of

Bank of America.

February jump offsets January weakness

Bank of America aggregated credit and debit card spending per household rose 2.9% year-over-year (YoY) in February, following

the decline of 0.2% year-over-year (YoY) in January. However, this rise in the YoY rate of growth reflected the extra day in

February due to the leap year.

On a seasonally adjusted (SA) basis, which attempts to control for the impact of additional days and other seasonality, total card

spending per household rose 0.4% month-over-month (MoM) in February, following the decline of 0.3% in January. In February,

services spending rebounded after a weather-impacted January, but this partly offset a renewed weakening in retail sales

(Exhibit 1). Overall, the data suggests that underlying consumer spending momentum in 2024 is soft, but stable.

Exhibit 1: Total card spending rose 0.4% MoM in February on a seasonally adjusted basis

Total card spending per household (monthly, seasonally adjusted, % growth MoM) and contribution to growth from retail and services (percentage points, pp)

Source:

Bank of America internal data

BANK OF AMERICA INSTITUTE

-1

-0.5

0.5

Jun-23 Aug-23 Oct-23 Dec-23 Feb-24

Retail ex restaurants/bars Services Total card

I NSTITUTE

Accessible version

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Lower- and middle-income spending slows

From being a point of strength during 2023, it appears that lower- and middle-income households’ spending growth has been

softening (Exhibit 2). Given that these cohorts had been ‘outperforming’ in spending growth last year, what effect might this

have on overall consumer momentum?

Exhibit 2: Lower-income spending has softened, but remains

stronger than higher-income spending

Total card spending per household by income (seasonally-adjusted, %

growth YoY)

Source:

Bank of America internal data

BANK OF AMERICA INSTITUTE

Exhibit 3: Jobs growth has tended to be skewed towards lower

paying industries

Jobs growth (YoY) compared to average hourly earnings by industry

(January 2024, $)

Source

: Bureau of Labor Statistics

BANK OF AMERICA INSTITUTE

One important driver for lower- and middle-income spending has been the robust US labor market, which has tended to reflect

strong jobs growth in industries with relatively lower average hourly earnings (Exhibit 3). However, it could be that some of the

momentum at the lower-income end of the labor market may be slowing. Exhibit 4 shows employment growth by level of

education, which is likely to be, albeit imperfectly, related to pay. Bureau of Labor Statistics (BLS) data shows employment for

those without a college education appears to have been slowing in recent months and turned negative in January.

Exhibit 4: Some of the momentum in employment growth among

those with high school or lower educational attainment appears to

be slowing

Employment growth by education (% YoY)

Source:

Bureau of Labor Statistics

BANK OF AMERICA INSTITUTE

Exhibit 5: The gap between higher- and lower-income

unemployment rises has narrowed in recent months

Change in the number of households receiving unemployment benefits

through direct deposit (%YoY)

Source:

Bank of America internal data

BANK OF AMERICA INSTITUTE

-2

Feb-23 May-23 Aug-23 Nov-23 Feb-24

<$50K $50K-$125K >$125K

Private

Education

and Health

Leisure and

Hospitality

-200 0 200 400 600 800 1000 1200

Average hourly earnings, January 2024

Jobs change, Jan 2023-Jan 2024('000s)

-4

-2

Jan

2023

Jul

2023

Jan

2024

High School graduate or lower

Some college, or associate degree

BA degree or higher

-100

-60

-20

100

2022 2023 2024

<$50K $50K-$125K >$125K

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Bank of America internal data on households receiving unemployment benefits through direct deposit shows an increase from a

year ago across all income cohorts, albeit the levels of households receiving these payments remains at very low levels. But

while the rise in the number of households receiving unemployment benefits is larger for higher-income cohorts, the difference

has been narrowing in recent months (Exhibit 5).

So, if this trend continues, it appears that the outperformance of the lower-income end of the labor market may be easing. For

those who are employed, however, Bank of America internal data continues to show steady growth in after-tax wages and

salaries for both lower- and-middle income households (Exhibit 6). And in February, all income cohorts saw a rise in YoY after-tax

pay growth. Even if labor demand is slowing at the lower-income end of the labor market, it may still take some time to show up

in pay growth.

A further support for lower-income household spending continues to come from elevated bank deposits. Exhibit 7 shows that

across income cohorts, including households with income less than $50K, the monthly median value of savings and checking

balances is around 40% higher than the levels in 2019.

Exhibit 6: Lower- and middle-income households after-tax income

appears to be growing steadily

After-tax wage and salary growth by income group, based on Bank of

America aggregated consumer deposit data (%YoY, 3-month moving

average, seasonally adjusted (SA))

Source:

Bank of America internal data

BANK OF AMERICA INSTITUTE

Exhibit 7: Households continues to have higher deposit balances

compared to 2019

Monthly median household savings and checking balances by income

(2019=100) for a fixed group of households through January

Source:

Bank of America internal data. Bank of America internal data. Monthly data includes

those households that had a consumer deposit account (checking and/or savings account)

for all months from January 2019 through

January 2024.

BANK OF AMERICA INSTITUTE

Could spending by higher-income households close the gap?

An important question is whether a recovery in spending by higher-income households could offset any potential ease in

spending by those with lower incomes?

We think this question is key because, as Exhibit 8 shows, the highest earning 30% of households (corresponding roughly to

household incomes of $120K or higher) account for more than half of overall US consumer spending according to Bureau of

Economic Analysis (BEA) data.

But there is a something of a dichotomy among higher-income households. Our data on after-tax wages and salaries for that

group shows almost no growth for households with income above $125K for nearly a year (Exhibit 6). Despite this, consumer

sentiment, as measured by the University of Michigan Consumer Sentiment Index, has rebounded for those in the top third of

the income distribution (Exhibit 9).

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

2019 2020 2021 2022 2023

2024

<$50K $50K-$125K $125K+

100

200

300

2019 2020 2021 2022 2023

2024

<$50K $50K-$100K $100K+

11 March 2024

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Exhibit 8: A large percentage of overall US consumer spending

comes from those with the highest incomes

Share of total consumer expenditure by deciles of before tax income (%)

Source:

Bureau of Economic Analysis

BANK OF AMERICA INSTITUTE

Exhibit 9: There has been a bigger rebound in sentiment among

the top third of households by income

Michigan Consumer Sentiment by Income Tercile (1966 Q1=100)

Source:

Haver Analytics

BANK OF AMERICA INSTITUTE

An important point here is that households at the highest end of the income distribution are also likely to have more financial

assets than those at the lower end of the distribution. In fact, in 2023 Q3, the top 1% of the income distribution held more than

a fifth of total household assets and a third of all corporate equities and mutual fund shares, according to data from the Federal

Reserve.

These stocks of wealth may allow some very high-income households to smooth through any weakness in labor income. It is

noteworthy that as we move further up the income distribution in our data to look at incomes above $600K, YoY spending

growth appears to have been stronger than households with incomes over $125K (Exhibit 10).

With the rise in equities over the last six months it could be that overall higher-income spending may begin to show strength if

more households start to feel positive ‘wealth effects,’ particularly if the labor market for higher-income households also is solid.

Exhibit 10: Households with incomes above $600K appear to be increasing spending at a faster pace than households with incomes over $125K in

recent months

Total card spending per household YoY growth by higher-income cohorts (3-month moving average of monthly data, %)

Source:

Bank of America internal data

BANK OF AMERICA INSTITUTE

10%

15%

20%

25%

1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th

Income decile

100

110

120

2019 2020 2021 2022 2023 2024

Top third Bottom third

-4

-2

2023 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2024 Feb

>$125K >$600K

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Buy now, pay later purchasing slows

Are a growing number of consumers turning to alternate forms of payments, such as buy now, pay later (BNPL), to supplement

spending? Bank of America internal data certainly supports that view, but also suggests that the share of customers doing so is

increasing at only half the rate it was compared to this time last year.

Using Bank of America internal data, we find just under 9% of Bank of America deposit customers made at least one BNPL

payment in January 2024, up 0.6 percentage points (pp) compared to January 2023. That compares to a 1.2pp increase the year

before (Exhibit 11). Younger generations (Gen Z and Millennials) have had a higher adoption rate, while their growth rate has

seen an even larger slowdown.

Bank of America internal data also shows that use of BNPL has slowed across all income groups, but the slowdown has been

most pronounced for households earning more than $125K, with the YoY share growth for this cohort just above zero (Exhibit

12).

Exhibit 11: Share of Bank of America customers with BNPL

transactions in January 2024 has increased only 64 bps YoY, after

increasing 120bps YoY in January 2023

Share of Bank of America customers with at least one BNPL payment;

overall and Gen Z/Millennial (monthly, %)

Source:

Bank of America internal data

BANK OF AMERICA INSTITUTE

Exhibit 12: The YoY

growth of higher income (>$125k) Bank

of America customers with a BNPL payment was nearly flat in

January 2024

Increase in the share of Bank of America customers with at least one

BNPL payment by income (YoY, %)

Source:

Bank of America internal data

BANK OF AMERICA INSTITUTE

In fact, households earning less than $50K per year are making up a larger share of BNPL users each year (Exhibit 13). And while

we find that BNPL users’ retail spending is higher than non-BNPL households, it appears that that those using BNPL services are

starting to slow their retail spending relative to non-BNPL users (Exhibit 14).

Exhibit 13: Households earning less than $50K per year are

becoming a larger proportion of the BNPL universe every year

Households’ earning <$50K share of BNPL users (%)

Source:

Bank of America internal data

BANK OF AMERICA INSTITUTE

Exhibit 14: Retail spending per household for BNPL users is

slowing relative to non-BNPL users

Retail spending, excluding restaurants and gas, per BNPL and non-BNPL

households indexed to 2021 (2021 average = 100)

Source:

Bank of America internal data

BANK OF AMERICA INSTITUTE

10%

11%

12%

Jan-22 Jul-22 Jan-23 Jul-23

Jan-24

Overall Gen Z/Mill

0.0%

0.6%

1.2%

1.8%

2.4%

3.0%

<$50K $50K - $125K $125K+

Jan-24 Jan-23

30%

35%

40%

45%

Jan-22 Jan-23 Jan-24

100

120

140

160

Dec-21 Dec-22 Dec-23

BNPL Users Non-BNPL

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Monthly data update

Total payment growth across all channels (ACH, Bill Pay, Credit and Debit Card, Wires, Person-to-Person, Cash and Check) rose

7.0% YoY in February. Bank of America total credit and debit card spend, which comprises over 20% of total payments, increased

6.4% YoY.

Methodology

Selected Bank of America transaction data is used to inform the macroeconomic views expressed in this report and should be

considered in the context of other economic indicators and publicly available information. In certain instances, the data may

provide directional and/or predictive value. The data used is not comprehensive; it is based on aggregated and anonymized

selections of Bank of America data and may reflect a degree of selection bias and limitations on the data available.

Any payments data represents aggregated spend from US Retail, Preferred, Small Business and Wealth Management clients with

a deposit account or credit card. Aggregated spend include total credit card, debit card, ACH, wires, bill pay, business/peer-to-

peer, cash, and checks.

Any Small Business payments data represents aggregate spend from Small Business clients with a deposit account or a Small

Business credit card. Payroll payments data include channels such as ACH (automated clearing house), bill pay, checks and wire.

Bank of America per Small Business client data represents activity spending from active Small Business clients with a deposit

account or a Small Business credit card and at least one transaction in each month. Small businesses in this report include

business clients within Bank of America and generally defined as under $5mm in annual sales revenue.

Unless otherwise stated, data is not adjusted for seasonality, processing days or portfolio changes, and may be subject to

periodic revisions.

The differences between the total and per household card spending growth rate can be explained by the following reasons:

1. Overall total card spending growth is partially boosted by the growth in the number of active cardholders in our sample. This

could be due to an increasing customer base or inactive customers using their cards more frequently.

2. Per household card spending growth only looks at households that complete at least five transactions with Bank of America

cards in the month. Per household spending growth isolates impacts from a changing sample size, which could be unrelated to

underlying economic momentum, and potential spending volatility from less active users.

3. Overall total card spending includes small business card spending while per household card spending does not.

4. Differences due to using processing dates (total card spending) versus transaction date (per household card spending).

5. Other differences including household formations due to young adults moving in and out of their parent’s houses during

COVID.

Any household consumer deposit data based on Bank of America internal data is derived by anonymizing and aggregating data

from Bank of America consumer deposit accounts in the US and analyzing that data at a highly aggregated level. Whenever

median household savings and checking balances are quoted, the data is based on a fixed cohort of households that had a

consumer deposit account (checking and/or savings account) for all months from January 2019 through the most current month

of data shown.

Bank of America aggregated credit/debit card spending per household includes spending from active US households only. Only

consumer card holders making a minimum of five transactions a month are included in the dataset. Spending from corporate

cards are excluded. Data regarding merchants who receive payments are identified and classified by the Merchant Categorization

Code (MCC) defined by financial services companies. The data are mapped using proprietary methods from the MCCs to the

North American Industry Classification System (NAICS), which is also used by the Census Bureau, in order to classify spending

data by subsector. Spending data may also be classified by other proprietary methods not using MCCs.

Generations, if discussed, are defined as follows:

1. Gen Z, born after 1995

2. Younger Millennials: born between 1989-1995

3. Older Millennials: born between 1978-1988

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4. Gen Xers: born between 1965-1977

5. Baby Boomer: 1946-1964

6. Traditionalists: pre-1946

Any reference to card spending per household on gasoline includes all purchases at gasoline stations and might include

purchases of non-gas items.

Additional information about the methodology used to aggregate the data is available upon request.

Contributors

David Michael Tinsley

Senior Economist, Bank of America Institute

Joe Wadford

Economist, Bank of America Institute

Taylor Bowley

Economist, Bank of America Institute

Liz Everett Krisberg

Head of Bank of America Institute

Sources

Li Wei

Director, Global Risk Analytics

Kimberly Warren

Director, Global Risk Analytics

Ana Maxim

Senior Vice President, Consumer and Small Business

Mel Roasa

Vice President, Digital and Marketing

11 March 2024

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Disclosures

These materials have been prepared by Bank of America Institute and are provided to you for general information purposes only. To the extent these materials reference Bank of

America data, such materials are not intended to be reflective or indicative of, and should not be relied upon as, the results of operations, financial conditions or performance of Bank

of America. Bank of America Institute is a think tank dedicated to uncovering powerful insights that move business and society forward. Drawing on data and resources from across

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views or opinions expressed herein are solely those of Bank of America Institute and any individual authors listed, and are not the product of the BofA Global Research department or

any other department of Bank of America Corporation or its affiliates and/or subsidiaries (collectively Bank of America). The views in these materials may differ from the views and

opinions expressed by the BofA Global Research department or other departments or divisions of Bank of America. Information has been obtained from sources believed to be

reliable, but Bank of America does not warrant its completeness or accuracy. Views and estimates constitute our judgment as of the date of these materials and are subject to change

without notice. The views expressed herein should not be construed as individual investment advice for any particular person and are not intended as recommendations of particular

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