Bank of America finds that the spending gap between income groups in the US is widening

The US is showing signs of one “K-shaped” economy with spending by lower-income consumers showing little growth compared to their higher-income counterparts, according to a new analysis from the Bank of America Institute.

Internal data in the report showed that the quarterly average of total card spend in November reflected a K-shaped pattern as the holiday season began in earnest.

“Currently, expenditure growth among higher-income households – that is, the top third of households by income – is around 2.6% annually, but for lhouseholds with a higher incomeIt’s only 0.6%,” Tinsley noted. “That’s a pretty big gap.”

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‘I think there are two sides to that story. One of them is the labor market: if you look at the wages that end up in people’s bank accounts in our country Bank of America We’re seeing higher income wage growth of about 4% and lower income wage growth of about 1.4%, and that’s very close to the biggest gap in the data in about a decade,” he explained. “So on the income side, the K-shape is also very clear.”

“The other leg is, in a sense wealth, gains in the stock market‘, which Tinsley noted have mainly gone to middle- and upper-income households who generally own these stocks.

“The market, which has been relatively strong over the past two to three years, tends to support consumer spending among higher-income households,” he added.

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Spending growth among higher-income Americans has been driven by wealth and market effects, the report said. (Eduardo Munoz/Reuters/Reuters)

Labor market trends are likely a key driver of K-shaped dynamics among consumers, the report said.

After-tax wages and wage growth among lower-income households continues to lag that of higher-income households, while the slowdown in lower-income wage growth that prevailed in the spring and summer appeared to level off in November, the Bank of America Institute reported.

The K-shaped pattern, which affects consumers across all income brackets, was also seen in the company’s data on spending on holiday items.

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The report also shows that Americans have been more price sensitive this holiday season. (Kamil Krzaczynski/AFP via Getty Images/Getty Images)

The Bank of America Institute found that while lower-income households experienced relatively healthy spending growth, they lagged behind middle- and upper-income households. holiday spending growth in the week leading up to Cyber ​​Monday.

The report also shows that consumers have been price sensitive over the festive period and that the growth in spending appears to have been driven by more transactions, with average spending per transaction little changed. For online holiday purchasestransactions increased by approximately 10%, while the amount spent increased by approximately 9%.

“People seem to be quite effective at avoiding or mitigating price increases due to things like tariffs. What we’re seeing is that the amount of goods they’re buying in terms of holiday spending is about equal to the dollars they’re spending,” he explains.

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“They seem to be using online quite well because they’re quite price sensitive. They’re squeezing quite a bit of volume out of their dollars,” Tinsley added.