00:02 Speaker A
Bank of America’s latest consumer data tells a tale of two wallets in America. Spending is still growing, but it’s being driven mostly by higher income households.
00:09 Speaker A
For more we’re bringing it now. David Tinsley, senior economist at the Bank of America Institute. David, it’s good to see you.
00:15 Speaker A
So your report calls this a a tale of two wallets, David. Explain that trend for us. What what is the divide like right now between high and and low-income consumers and what what’s driving that?
00:27 David Tinsley
Well, you know, it’s quite wide. So the overall picture is solid, spending uh across the US in our data up uh four months in a row, .2 month on month in September.
00:41 David Tinsley
But digging just beneath that, high-income consumers, their year-on-year uh spending growth, card spending growth, 2.6, lower-income consumers, that’s the bottom third of households by income, just 0.6.
00:54 David Tinsley
So there’s a real divergence.
00:57 David Tinsley
It’s pretty wide at least as far back as uh the since the pandemic.
01:07 David Tinsley
And you know, I think the main reason, uh well there are a couple of reasons, but the main reason I think is wages. When we look at our data, the pay going into people’s accounts, you know, this is a very broad data set. We have 69 million consumer and small business customers.
01:21 David Tinsley
When you look at that, high income wage growth, 4% year over year, pretty solid number.
01:27 David Tinsley
uh, lower income, uh, consumers, households, growing at 1.4% year over year.
01:31 David Tinsley
And that divergence, uh, has widened really over the last six months or so. So that’s I think the primary driver.
01:39 Speaker A
What if the stock market, David suffered a pullback or even a correction? What could that mean for high-income consumers?
01:52 David Tinsley
Well, you know, that’s a interesting point. Wealth is very skewed uh along the income distribution in the US of obviously, in many countries as well.
02:03 David Tinsley
What that means is a lot of financial assets linked to the equity market are held by the top end of the income distribution.
02:13 David Tinsley
And when we look at our data in detail and we look at the spending growth of just the top 5% of households by income, we see quite a close relationship in recent years between what the S&P’s been doing and how much their spending is outrunning uh the middle of the income distribution.
02:30 David Tinsley
So, I guess what that means is all the time the equity market, uh remains roughly where we are, uh, higher income spending growth should remain solid, intact, still out gunning the middle income, uh, pack if you like.
02:47 David Tinsley
Obviously, if there were a correction, we might see some softening there.
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