REUTERS/Rick Wilking
- Americans are still shelling out cash for discretionary spending, despite concerns of a weakening consumer.
- Total card spending is likely up 4.5% year-per-year over the past 3 months, Bank of America forecasted.
- Americans likely ran out of their excess savings last quarter, the San Francisco Fed previously estimated.
American consumers are still spending, even as commentators fret over dwindling excess savings amassed over the course of the pandemic.
Retail sales data for September is due out next Tuesday, October 17, and Bank of America analysts are forecasting another show of resilience by US consumers.
Despite concerns of weaker spending, BofA says data doesn't seem show slowing discretionary purchases just yet, with total credit card and debit card spending per household up 0.7% year-over-year in September, according to data from the bank.
Spending in core areas — which include gas, building materials, restaurants, and retail excluding autos — has increased 4.6% year-over-year from the months of May to August, the bank said in a note on Thursday. When accounting for inflation, core spending was likely up 6% during that time frame, economists said, which would put total core retail sales up 0.2% in September on a seasonally adjusted basis.
That reflects softer spending compared to previous months, but it would mean household card spending was still up 4.5% year-over-year over the past three month period, the bank said, a sign that consumers are still swiping their cards.
Total discretionary spending as a percentage of income has followed historical trends for this time of year in staying resilient, with those making between $50,000-$125,000 spending over 70% of income on discretionary purchases in September.
Bank of America
And total card spending in the week surrounding Labor day, a closely watched time for consumer spending, also increased this year, with the chart below depicting another sharp rise about a month after the holiday as well.
The bank says there are two takeaways from it's September data:
"First, there are no clear signs of cracks yet in consumer spending. Second, we saw a similarly outsized bump around July 4. If consumers were to continue to ramp up spending around holidays, that would bode well for the 4Q 2023 outlook, which will be heavily driven by holiday season spending."
Bank of America
BofA's spending data paints a promising picture of a consumer that's humming along despite an uncertain economic outlook. Yet, other experts have warned the strong spending trends could soon reverse, with inflation well-above the Fed's target and student loan payments having restarted at the beginning of this month.
Those headwinds could wipe out excess savings stored up from the pandemic. According to a study from the San Francisco Fed, Americans may have run out of their excess savings at the end of last quarter.