Wealthier Americans cut their credit card spending for a third straight month in July as inflation and market volatility weighed on sentiment, according to a study by Bank of America Institute.
Among households making more than $125,000 a year, spending on everything outside of the basics — such as groceries, gasoline and clothing — fell in July by about 0.5%, extending declines in the previous two months, the
Lower down the income ladder, spending held up better. It increased in July among households making less than $20,000, and was little changed for those with incomes between $20,000 and $75,000, according to BofA.
The report offers a detailed breakdown of spending among groups that, in different ways, are key to the U.S. economy's prospects as decades-high inflation weighs on consumer sentiment and eats into household budgets.
Wealthier Americans account for a disproportionate share of overall spending, and earlier this year they stepped up spending amid a revival of demand for services as pandemic constraints eased, according to BofA.
In the two prior years, lower-income consumers led spending growth. Poorer households tend to spend more of their incomes so they can have a bigger impact on the changing patterns from month to month.
"With rising inflation and financial market volatilities, there are growing concerns around a major slowdown in spending for those that are more affluent," Bank of America Institute economist Anna Zhou said in the research note. Still, those groups remain financially healthy with a higher savings rate that can provide a "buffer" as prices soar, she wrote.
Higher-income consumers pulled back on travel-related expenses, such as airplane tickets and hotel stays, according to BofA, while lower-earning groups are still spending about 10% more on lodging than they typically do. The increase in spending on clothing during the back-to-school period was also smaller among higher earners, though outlays on jewelry jumped amid a busy wedding season.
Government data last week showed overall
