The latest consumer spending data from Bank of America (BofA) indicated a year-over-year increase of 1.9% in January. Despite a slight month-over-month decline of 0.4% in seasonally-adjusted card spending, BofA suggests the dip is largely due to weather-related factors, rather than indicating a broader economic downturn.
The report highlights a positive trend in card spending growth over recent months, with notable increases among Baby Boomers and Generation X. This demographic trend is attributed to an improvement in their after-tax wage and salary growth, as gleaned from Bank of America deposit data.
The automotive sector has also shown a marked increase in sales since the fall of 2024. Firm pricing and relatively high auto loan rates have led to rising auto loan payments.
However, a strong labor market has kept the burden of these payments in check relative to after-tax wages and salaries. BofA notes that while the current situation appears manageable, there could be potential risks should the labor market weaken.
BofA further comments on the overall financial health of households, which they view as solid. The last quarter saw an increase in the contribution rate to Bank of America 401(k) plans.
Although savings buffers have decreased, they are still considered to be at comfortable levels, suggesting that consumers are in a relatively strong financial position.
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