Consumer Checkpoint

Still smiling

05 May 2022

Consumer Checkpoint is a regular publication from the 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.

Key talking points

• Bank of America data shows consumers are still spending. Total payments were up 25% YoY in April, with growth elevated

due to the timing of tax payments. Transactions, up 8%, provide a more normalized indication of healthy consumer demand

this month.

• Total credit and debit card spending was up 13% YoY in April, compared to 11% in March. Travel and entertainment spending

continues to elevate growth.

• Card spending per household is up around 23.7% in the 28-days to April 30 compared to the same period in 2019, with

spending on this measure up 33.1% amongst lower income households. Lower income average spending growth appears to

have flattened over recent weeks, but this may represent usual seasonality.

• The pandemic saw a big swing towards goods and away from services spending. This now looks to have substantially reve rsed

as the economy emerges from the latest pandemic wave.

Easter bunny arrives with spring in its step

Still smiling. Bank of America aggregate credit and debit card spending was up 13% YoY in April. Within this, credit card

spending rose by 22% YoY, while debit card spending increased by 6% over the same period.

While higher inflation is leading to higher spending it is clear consumer strength goes beyond this, with aggregate spending

growth exceeding current US consumer price inflation of 8.5% in March. There is sustained strength observed in travel and

entertainment; spending at airlines and travel agencies is up over 60% YoY, and spending at event ticket agencies is up 140%. As

discussed in our Consumer Morsel, (see report) ‘Three reasons to be cheerful’

, the strength of the labor market is likely

alleviating some of the pain of higher prices for those on lower incomes.

As Exhibit 1 indicates, in 2021, card spending per household was rising sharply around this period, reflecting the third Econom ic

Impact Payment ('EIP3') and the re-opening of the economy. This makes the 2022 year-on-year growth rate comparison

stretching (ie difficult to be very strongly positive) but even so card spending per household is still rising in 2022 on this basis.

Also, compared to earlier years, it is significantly higher – the three-year growth rate in the 28-days to April 30 was 23.7%.

I NSTITUTE

Accessible version

Exhibit 1: Average daily total card spending per household (rolling 28-day averages, indexed to 2019 average spend)

Average daily card spending is climbing in 2022 and is higher than each of the last three years

Source:

Bank of America Internal Data

Lower income spending rising sharply over pre-pandemic level. It is really in lower income households (<$50k) where the

comparison to 2021 is very ‘challenging’ (ie very difficult to get high positive growth rates on a year earlier) as illustrated in

Exhibit 2. This group’s spending was really ramping up as stimulus checks were paid and people re-engaged with the economy at

this time in 2021. In 2021 households with higher income (>$125k) saw a smaller lift in spending per household. Overall though,

the lower income group is tracking much larger increases in spending compared to pre-pandemic 2019 spending levels In the

most recent monthly data, there has been some flattening in spending, particularly among lower income households, but it is too

early to say if this simply represents the normal seasonal pattern.

Exhibit 2: Average daily total card spending per household with

income below $50k (rolling 28-day averages, indexed to 2019

average spend)

Card spending for households with incomes below $50k was rising

very strongly in 2021. In 2022 it is still managing to increase relative

to 2021

Source:

Bank of America Internal Data

Exhibit 3: Average daily total card spending per household with

income above $125k (rolling 28-day averages, indexed to 2019

average spend)

In 2021 households with incomes above $125k saw a smaller lift in

spending per household

Source:

Bank of America Internal Data

100

125

150

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2019 2020 2021 2022

100

125

150

Jan Mar May Jul Sep Nov

2019 2020 2021 2022

100

125

150

Jan Mar May Jul Sep Nov

2019 2020 2021 2022

Interestingly, the picture of a relatively strong performance in spending am ong lower income households is supported by the

latest BofA US Consumer Confidence Indicator (Exhibit 4) which is produced by the BofA Global Research team (refer to

methodology below). Recent confidence level readings in 2022 have seen stability in the consumer confidence of the lower

income consumer, while the confidence of higher income consumers has fallen. This is despite considerable amount of news-

flow around inflation and price rises, which might have been expected to dent the confidence of lower income groups. One

explanation could be the strength of the labor market and wage growth is helping offset some inflationary concerns.

Exhibit 4: BofA US Consumer Confidence Indicator by income groups (% Daily weighted moving average)

Sentiment of higher income consumers have plunged, while it is holding up better for lower income groups

Source:

BofA Global Research

The indicator identified as the BofA US Consumer Confidence Indicator above is intended to be an indicative metric only and m

ay not be used for reference purposes or as a measure of performance for any financial

instrument or contract, or otherwise relied

upon by third parties for any other purpose, without the prior written consent of BofA Global Research. This indicator was not created to act as a benchmark. The 28 day rolling

moving average is weighted by the daily sample size during the 28

-day window. Average sample size: 2,914 per 28-day window (14-day 1,460). Data through April 21.

Rotation, Rotation, Rotation

The successive waves of the pandemic saw households holding back on services spending, both through choice and by mandate,

with the initial strict lockdowns closing restaurants, theatres and travel for example. But, as the US has re-opened following the

omicron wave, there has been a resumption of services spending. As Exhibit 5 shows, the ratio of household card spending on

‘goods’ (as measured by retail sales categories less restaurants) and ‘services’ (the remaining part of card spending) is now more

or less back at 2019 levels for both higher and lower income households.

As a result, the recent momentum in services spending per household, up over 20% in the three years to April 2022, may be

expected to slow eventually. At the same time, higher goods prices for things like fuel and food are likely to support goods

spending, even if volumes are pressured.

20%

25%

30%

35%

40%

45%

50%

55%

Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 2 2

<=50k >125k

Exhibit 5: The monthly ratio of card spending per household on retail ex restaurants (‘goods’) to ‘services’

During lockdowns spending on goods rose relative to services spending. In the current period the ratio is more in line with the level in 2019.

Source:

Bank of America Internal Data

Broader payments data supports growth

For April, Bank of America payments data supports the robust story coming out of credit and debit card spending. Growth across

all channels was up 25% YoY in April, elevated due to the timing of this year's tax payment deadline relative to last year.

Transaction growth, a more normalized indicator this month, was up 8%.

Zooming out on a longer time horizon underscores the strong growth we've observed as compared to pre-pandemic. April year to

date total payments and card spending was up 17% YoY and 15% respectively, topping the pre-pandemic growth rates.

Overall, internal Bank of America data continues to paint a healthy picture of the consumer.

Exhibit 6: Year-to-date total payments and credit/debit payments (% y/y) and net change in confirmed US coronavirus cases (‘000s)

Cumulative year-to-date payment growth rose slightly in April, and remains very strong compared to growth in the period 2019-2020

Source: Bank of America Internal Data , Bloomberg

0.6

1.2

1.8

2.4

Jan 19 Jul 19 Jan 20 Jul 20 Jan 21 Jul 21 Jan 22

Household income <$50k Household income >125k

5,000

10,000

15,000

20,000

25,000

-20%

20%

40%

Jan 19 Jul 19 Jan 20 Jul 20 Jan 21 Jul 21 Jan 22

Net change in confirmed covid cases (rhs) Total Payments YTD Credit and Debit YTD

March 2020 EIP1: $1200

per eligible adult

March 2021 EIP3: $1400

per eligible adult

Jan 2021 EIP2: $600

per eligible adult

Contributors

David Tinsley

Director, Bank of America Institute

Acknowledgments

Yanghong Shao

Senior Vice President, Global Risk Analytics

Ana Maxim

Senior Vice President, Consumer and Small Business

Jonathan Kaplan

Senior Vice President, Digital and Marketing

Methodology

Selected Bank of America transaction data are used to inform the macroeconomic views expressed in this report and should be

considered in the context of other economic indicators and publicly available information. In certain instances, the data may

provide directional and/or predictive value. The data used are not comprehensive; they are based on aggregated and anonymized

selections of Bank of America data and may reflect a degree of selection bias and limitations on the data available.

Total payments include total credit card, debit card, ACH, wires, billpay, person-to-person, cash and checks. The payments data

represents aggregate spend from Retail, Preferred, Small Business and Wealth Management clients with a deposit account or

credit card. Data is not adjusted for seasonality, processing days or portfolio changes, and may be subject to periodic revisions.

Aggregate card spend is based on processing date while the ‘per household’ measure is based on transaction date.

Bank of America credit/debit card spending per household include spending from active US households only. Only card holders

making a minimum of five transactions a month are included in the dataset. Spending from corporate cards are excluded. Data

regarding merchants who receive payments are identified and classified by the Merchant Categorization Code (MCC) defined by

financial services companies. The data are mapped using proprietary methods from the MCCs to the North American Industry

Classification System (NAICS), which is also used by the Census Bureau, in order to classify spending data by subsector.

Spending data may also be classified by other proprietary methods not using MCCs.

Additional information about the methodology used to aggregate the data is available upon request.

BofA US Consumer Confidence Indicator – methodology explained

The survey data for the BofA Consumer Confidence Indicator (BCCI), produced by the BofA Global Research US Economics team, is

collected online by survey company RIWI using "Random Domain Intercept Technology" (RDIT). This directs respondents who enter

an incorrect or lapsed URL address to a randomized survey site. The individuals who make these errors should constitute a random

and representative sample of the US online population. There may be advantages and disadvantages to this methodology.

The potential advantage is that RIWI is able to sample from hard-to-reach areas such as rural and underrepresented populations.

Moreover, while the data collected are not a fully randomized sample, Matthias Schonlau and Mick P. Couper find in their paper

(Statistical Science 2017, Vol. 32, No. 2, 279-292) that RIWI's methodology is a "near-probability" sample akin to " stopping

passersby on the street for an interview on the spot".

One potential disadvantage of this method is that the survey collects less comprehensive personal data about respondents,

meaning it is not possible to weight the sample with as many variables as some pollsters. That said, RIWI provides respondent

weight values which are generated post-stratification to match the age and gender of the US population based on data from the

Census Bureau. But there is a risk that the sample is skewed towards heavy internet users.

Every survey method has advantages and disadvantages. At the least, the method employed is not currently used to construct a

measure of US consumer confidence so it should provide a potentially useful alternative view.

The aim is to achieve approximately 2,500 responses per month for each question. However, because some respondents choose

not to respond to all questions, it will not be possible to achieve the same sample size for every question. Moreover, the results

that are conditioned on demographic factors may further reduce the sample size and not capture the full universe of responses.

Under each chart, a note is made of the sample size that the analysis is based on each month. The confidence interval of the

responses is wider for results based on a smaller sample. The survey period will usually run the full calendar month.

Survey questions

The full survey generally includes 10 questions each month: three nonrotating questions on current conditions and future

expectation for personal finances and the economy (possible responses in italics) and a few questions on various topics such as

Covid sentiment, supply shortages, financial/credit conditions, and the labor market.

Nonrotating questions

1. Over the past year, your financial position has:

Improved a lot, improved a little, not changed, worsened a little, worsened a lot

2. Compared to a year ago, the US economy has:

Improved a lot, improved a little, not changed, worsened a little, worsened a lot

3. Do you expect the US economy over the next 12 months to:

Improve a lot, improve a little, not change, worsen a little, worsen a lot

Constructing the BofA US Consumer Confidence Indicator

Answers to questions 2 and 3 are used to construct the US Consumer Current Conditions Indicator and

US Consumer Expectations Indicator, respectively. For each question, a daily diffusion index is calculated that is equal to the sum

of the share of respondents reporting a "positive" response (e.g. improved a lot or improved a little) and half of the share of

respondents reporting a "neutral" response (e.g. not changed).

Each daily response is then weighted by the number of responses to total responses over the 28 day period to arrive at the

diffusion index for the 28 day period. This therefore, emphasizes days where more responses are made rather than treating each

day equally.

Finally, the BofA US Consumer Confidence Indicator is the simple average of the US Consumer Current Conditions Indicator and the

US Consumer Expectations. This indicator is useful as another measure of consumer confidence and is potentially advantageous to

preexisting consumer confidence measures (e.g. Conference Board, University of Michigan) because it can be updated on a timelier

basis.

In addition to the limitations noted above about the survey, the length of the survey is one potential limitation. Since the survey

has only been conducted since 2018, there is not enough history to fully understand how this measure of consumer confidence

could evolve over the business cycle.

Disclosures

These materials have been prepared by the Bank of America Institute and are provided to you for general information purposes only. The Bank of America Institute is a think tank

dedicated to uncovering powerful insights that move business and society forward. Drawing on data and resources from across the bank and the world, the Institute delivers

important, original perspectives on the economy, Environmental, Social and Governance (ESG) and global transformation. Unless otherwise specifically stated, any views or opinions

expressed herein are solely those of the Bank of America Institute and any individual authors listed, and are not the product of the BofA Global Research department or any other

department of Bank of America Corporation or its affiliates and/or subsidiaries (collectively Bank of America). The views in these materials may differ from the views and opinions

expressed by the BofA Global Research department or other departments or divisions of Bank of America. Information has been obtained from sources believed to be reliable, but

Bank of America does not warrant its completeness or accuracy. Views and estimates constitute our judgment as of the date of these materials and are subject to change without

notice. The views expressed herein should not be construed as individual investment advice for any particular client and are not intended as recommendations of particular

securities, financial instruments, strategies or banking services for a particular client. This material does not constitute an offer or an invitation by or on behalf of Bank of America to

any person to buy or sell any security or financial instrument or engage in any banking service. Nothing in these materials constitutes investment, legal, accounting or tax advice.