NEW YORK, NY – Bank of America Institute released new analysis today which shows signs of a strengthening in consumer spending at the start of 2023. BofA credit and debit card spending per household rose 5.1% year-over-year (YOY) in January, compared to 2.2% YoY in December. While this increase includes the impact that the Omicron variant had on consumer spending in January 2022, a variety of factors are boosting the consumer this year:

• BofA card spending data revealed a meaningful increase in spending during the weeks after Christmas, suggesting consumers could have held back holiday spending to maximize savings from post-holiday promotions and discounts.
• An increase in minimum wages in over 20 states, many of which bring the wage rate in line with inflation, put more cash in the pockets of a significant proportion of workers, enabling increased spending.
• An 8.7% increase in social security payments came into effect in January, the largest increase in over 40 years. According to the Department for Social Security, this increase impacts approximately 70 million consumers.
• The resilience of the labor market – evidenced by January’s exceptionally strong non-farm payrolls report – underpins increased consumer spending throughout the month.

Households continue to feel headwinds from rising costs like rent and food inflation, areas which have a greater impact on lower-income consumers. It seems unlikely, however, that a tipping point in spending will be reached in the near term. Consumers continue to have elevated savings, even adjusting for inflation, suggesting they have not yet reached their financial limits. While BofA internal data suggests median household savings and checking balances across income groups have been trending down since April 2022, the spending of lower-income consumers does not look high relative to their savings.  Additionally, deposits remain above pre-pandemic levels for all income groups.

Other highlights of the Consumer Checkpoint include:

• Overall total credit and debit card spend, which makes up over 20% of total payments, was up 8.6% YoY in December, as total payments growth across all channels (Automated Clearing House, Bill Pay, Credit and Debit Card, Wires, Person-to-Person, Cash and Check) increased 7.5% YoY.
• Bank of America card spending per household was up 3.5% month-over-month (seasonally adjusted) on airlines and 1.8% on restaurants and bars; international spend rose, too, particularly in Asia, compared with the prior two years, due to further reopening and Lunar New Year celebrations
• According to the inaugural 401(k) Participant Pulse report, the average contribution rate to 401(k) retirement accounts dropped from 6.6% at the end of 2021 to 6.4% at the end of 2022, suggesting consumers may be substituting retirement savings to address short-term financial needs.
• The survey also found that the average annual participant contribution increased 1%  YoY so the decline in savings rate did not generally result in lower dollar contributions.

“While spending was slowing towards the end of 2022, consumers have entered the new year with a spring in their step” said David Tinsley, senior economist for Bank of America Institute. “With favorable macro tailwinds like the strength of the labor market and income gains, we have reasons to be hopeful that this increase is not just a blip but rather a longer-lasting trend.”

About the Consumer Checkpoint

Consumer Checkpoint is a regular publication from Bank of America Institute. It aims to provide a holistic and real-time estimate of US consumers’ spending and their financial well-being, leveraging the depth and breadth of Bank of America proprietary data. Such data is not intended to be reflective or indicative of, and should not be relied upon as, the results of operations, financial condition, or performance of Bank of America.

See the Consumer Checkpoint for methodology and definitions.

About Bank of America Institute

Bank of America Institute is dedicated to uncovering powerful insights that move business and society forward. Established in 2022, the Institute is a think tank that draws on data and analyses from across the bank and the world to provide timely and original perspectives on the economy, Environmental, Social and Governance (ESG), and global transformation. The Institute leverages the depth and breadth of the bank’s proprietary data, from 67 million consumer and small business clients, 56 million verified digital users, $4.2T in total payments in 2022 and $1.4T in consumer and wealth management deposits. From this robust data set, the Institute provides a unique perspective on the health of the economy. It also elevates thought leadership from throughout the bank that addresses long-term trends and shares these findings with the general public.

Bank of America

Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 68 million consumer and small business clients with approximately 3,900 retail financial centers, approximately 15,000 ATMs (automated teller machines) and award-winning digital banking with approximately 56 million verified digital users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business households through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and more than 35 countries. Bank of America Corporation stock is listed on the New York Stock Exchange (NYSE: BAC).

Reporters may contact:

Melissa Anchan, Bank of America
Phone: 1.646.532.9241
melissa.anchan@bofa.com