Core Insights - Consumer spending shows resilience despite inflation and economic uncertainty, with a median 4.9% year-over-year increase in nominal monthly spending reported in December, up from 4.1% in August [3] - There is a growing bifurcation in consumer behavior, with spending increasingly focused on necessities rather than discretionary items [4] - Higher-income households maintain spending activity, while lower-income households are more selective and cautious in their spending [8][9] Consumer Spending Trends - Households expect higher spending growth in essential categories: food at 5.4%, medical care at 5.3%, and housing at 4.1%, indicating a focus on essential costs [5] - Expected growth for transportation and recreation has declined, while clothing spending has edged higher but remains subdued, reflecting a shift towards non-discretionary needs [6] - The share of households reporting large purchases has declined, indicating a more targeted approach to spending rather than broad-based confidence [6] Income Disparities - Among households earning less than $50,000, the share reporting large purchases fell from 46% in August to 40% in December, while those earning between $50,000 and $100,000 saw a decline from 66% to 61% [8] - Higher-income households (earning $100,000 or more) reported a stable 77% participation in large purchases, maintaining the highest spending activity across income groups [9] Financial Resilience - Only 48% of consumers feel confident they could cover a $2,000 emergency within 30 days, despite half reporting over $2,500 in liquid savings, highlighting fragile financial cushions for many [11] - There is a disconnect between consumer expectations and reality, with 52% expecting to save more in the coming year, but only 24% having increased their savings in the past six months [12] Economic Outlook - The Fed's survey and additional data suggest that consumer spending will likely remain a stabilizing force for the economy in 2026, but the foundations of this spending are uneven, with higher-income households driving discretionary purchases while lower-income consumers focus on essentials [13]

Core Insights - Bank of America Institute's consumer checkpoint for October indicates a 2% year-over-year increase in debit and credit card spending, marking the largest increase since December 2024 [1] - The data reveals a divergence in spending growth between higher and lower income households, with lower income households increasing spending by 6.1% and higher income households by 2.6% [5][6] Spending Trends - Overall consumer spending is on an upward trend, driven primarily by services and gas, while retail spending has decreased slightly by 0.2% [2][4] - The analysis is based on actual spending data from nearly 70 million consumers, rather than survey responses, providing a close to real-time view of consumer behavior [4] Income Disparities - Spending growth is significantly higher among higher income households compared to lower income households, highlighting a "tale of two cities" in consumer spending [5][6] - Higher income households experienced a wage growth of 4% in September, the highest in four years, while lower income households saw a modest increase of 1.4% [10][11][12] Labor Market Insights - The labor market shows signs of fatigue, with payroll growth in September at just 0.5%, down from 1.7% at the beginning of the year and nearly 4% two years ago [9][10] - Despite the slowdown in employment growth, wages for employed households are increasing, particularly among higher income groups, which supports their spending [10][12] Market Influence - Higher income consumers are benefiting from wealth effects due to rising stock and housing markets, which in turn supports discretionary spending [12] - The data suggests that while the labor market is growing, it is doing so at a slower pace, yet higher income consumers continue to drive spending [14]