Tue, 09 August 2022 | consumers economy
Consumer spending increased in July, according to a new report from the Bank of America Institute, but some customers felt the effects of rising rent prices. According to internal data from Bank of America, median rent payments rose 7.4% over the previous year in July. Despite this, there are many reasons to continue to be optimistic about the steadfast endurance of US consumers: reduced gas prices in July gave consumers some relief, while merchant promotions increased spending on items. Consumers have not yet showed signals of increasing borrowing, and household deposit and savings balances are still high. Approximately in line with June's figures, Bank of America's total payments climbed 7% year over year in July. This figure provides a comprehensive picture of cash flow and includes credit card, debit card, Automated Clearing House, wires, bill pay, person-to-person, cash, and cheques.
The average household's card expenditure climbed by 5.3% annually, down from 5.7% in June. With personal consumption expenditure (PCE) inflation at 6.8% and the US Consumer Price Index (CPI) at 9.1% in June, it appears that "real (inflation-adjusted) spending" is still struggling.
All income levels are suffering the effects of increasing rents, according to internal Bank of America statistics, with those earning between $51,000 and $150,000 experiencing the largest rent increases.
Due to rising rent inflation, younger customers are feeling the pinch the most. In July, Gen Z's median payment increased 16% year over year, compared to just 3% for Baby Boomers.
Average gas spending as a percentage of total card spending per household for lower-income households ($50k per year), which peaked at nearly 10% in June, decreased to 9.3% in June as oil prices fell throughout July.
According to internal expenditure and payment data, Anna Zhou, economist with the Bank of America Institute, "consumers are not wilting in this summer heat." While 34% of US families are renters, "relief from decreased gas costs and shop promotions encouraged consumers to continue to spend throughout July even though pockets are getting tighter."
Source: Bank of America Institute