Bank of America Institute released a new publication today which shows that the American consumer continues to remain in good shape throughout the course of 2022 and is starting 2023 similarly.
Median household savings and checking balances remain well above pre-pandemic 2019 levels across all income cohorts. While there are increasing signs that these “buffers” are being drawn upon – likely due to high inflation and rising housing costs – they should be available for some time yet. Most consumers across the income distribution are not spending more on credit relative to debit cards compared to 2019 levels. Only those with incomes above $100k appear to be spending relatively more on credit cards, though this is likely a function of increased spending instead of accumulation of higher credit card debt.
Turning to the holiday shopping season, November saw continued growth in total card spending per household across retail and services, up 1.7% YoY last month. This compares to an increase of 3.1% YoY card spending per household in October, indicating a slower pace of growth. But retail spending is significantly weaker than total card spending growth, suggesting resilience in services spending. Despite a slow start to November, holiday sales appear to have picked up by the end of the month. Additionally, the increasing use of Buy Now Pay Later (BNPL) options means that some holiday spending may be spread out over future months. Bank of America internal data shows that card payments to BNPL companies accounted for approximately 2% of total online card spending volume, a small share but a sharp increase from the 2019 annual average of 0.3%.