U.S. Consumer Gap Narrows as Lower-Income Spending Rises 5.4%

3 articles · Updated · The Financial Brand · Aug 13

Bank of America data showed the post-pandemic K-shaped consumer split narrowing by July, with spending and wage growth converging across lower-, middle- and higher-income households outside the top 5%.
Lower-income households drove the shift: their card spending rose 5.4% year over year in July and after-tax wages grew 5.2%, effectively closing the gap between income and spending growth.
Household finances also looked broadly resilient, with total card spending up 5.0%, more consumers paying credit card balances in full, and savings and checking balances still above inflation-adjusted 2019 levels.
The top 5% remained on a different track, with the S&P 500 up more than 20% in July helping sustain their spending through a wealth effect even as wage growth moderated.
For banks, the convergence suggests income alone is becoming a weaker guide to customer behavior, reinforcing calls to track wages, spending, deposits and repayment patterns more closely.