Spending on credit and debit cards rose at the smallest pace in more than two years, dragged down by slower wages, fewer tax refunds and the end of pandemic-era benefits, according to a report by Bank of America Institute.
After a strong start of the year, spending per household rose 0.1% from a year ago, the slowest pace since February 2021, Bank of America Institute said Wednesday. The weakness was broad-based across goods and services.
Based on BofA internal data, households that make more than $125,000 a year saw a drop in annual after-tax wages for the first time since May 2020. The decline in pay may be due in part to hiring freezes and job cuts in industries such as technology and financial services, according to the report.
For lower-income families, the expiration of the Child Tax Credit program and of increased food stamp benefits probably weighed on discretionary spending.
Still, consumers have some resilience, economists led by David Tinsley wrote.
“One thing in the consumer’s favor, even as the economy slows, is that they still have financial buffers, including credit availability,” the economists wrote. That said, “the signs of a slowdown in the labor market and likely weakening of wage growth will probably prove a more persistent drag on consumer spending in the coming months.”
Retail data due Friday will provide further insight on goods spending last month. Inflation figures published Wednesday showed prices have remained sticky in March, which might persuade the Federal Reserve to raise interest rates at least once more in its effort to further cool the economy to bring prices down.
This article was provided by Bloomberg News.