While 2022 was a good year for consumer spending, the New Year brings with it cross-currents for U.S. consumers, including a possibly worse labour market and reducing inflation pressures in 2023, according to a new report that was issued today by the Bank of America Institute. Even though January and February are often slower months, New Year’s resolves to improve one’s health might give some encouragement for spending during those months.
According to statistics compiled by BofA from credit and debit cards, 2022 was a good year for consumer spending, with total card expenditure per household increasing 5.9% year-over-year (YoY).
The growth in average spending year over year for retail in 2022 was 3.7%, which was much lower than the much stronger 10% growth in services such as travel and entertainment. This stark difference was due to the fact that non-retail spending, which includes services such as travel and entertainment, included services.
At the beginning of the year 2023, customers will continue to face greater expenses of living, particularly for their utilities, which were in part driven by the fact that December in 2022 was colder than it had been the previous year. Even though natural gas prices have declined by more than half from their peak in August 2022, BofA’s internal data reveals that the average utility payment made by each client in December was higher than it was the previous year by 13%. In spite of the fact that there is still a shortage of workers, there are indications that pay growth is beginning to slow. Consumer after-tax salaries reached an all-time high of 8% in April 2022, but have since slowed to 2.7% YoY (three-month moving average) in December, according to statistics compiled internally by BofA.
An increase in the number of online searches for “gym memberships” takes place every January, which is illustrative of the fact that the start of a new year frequently heralds a clean slate and new goals to pursue. After remaining at relatively low levels during the winter vacation months, expenditure with credit and debit cards per household at fitness clubs increased dramatically in January of each year between 2010 and 2019, as shown by data obtained internally by BofA. However, as of December 2022, the average amount spent on membership cards by households at fitness clubs remained 35% lower than it had been before the epidemic. It is possible that a portion of this deficiency is attributable to the growth of in-home fitness, which has gained popularity since the pandemic as a result of relocation away from city centres and a desire for social separation, particularly among those of older generations.
“According to David Tinsley, a senior economist at the Bank of America Institute, “yet, for the time being, they are going to the gym in acceptable financial form.” “Although it is still early in the year, we anticipate that a decrease in the pressures brought on by rising costs of living and some relaxation in the job market will play a significant part in deciding how consumer spending will develop.”