<\/p>\n
Not sure if this is the case for everyone, but checking my credit-card statement has become a strange exercise these days.<\/p>\n
I’ll look down the list and see gas, groceries, a couple of ordinary errands, and maybe dinner out. Nothing huge, but the total can make it feel as though I’ve been living a lot larger than I actually have.<\/p>\n
That’s the weird thing about spending more money. It doesn’t necessarily mean you’re getting more for it.<\/p>\n
Bank of America’s latest economic report shared with me captures that contradiction perfectly. Americans are still opening their wallets, and the bank says the economy is holding up surprisingly well. <\/p>\n
In fact, their data suggests that the paychecks are improving for some households that have been falling behind. However, beneath those upbeat numbers, the picture gets a lot more complicated.<\/p>\n
Everyday expenses are absorbing more dollars, some retailers are losing ground, and Bank of America thinks the Federal Reserve might need to raise interest rates again.<\/p>\n
Interestingly, a strong economy on paper sounds like good news. So why can it still feel so expensive?<\/p>\n
Bank of America finds gas spending up 25% as other purchases weaken<\/p>\n
Bank of America isn’t seeing an economy running out of steam.<\/p>\n
In its latest US Economic Weekly report, economists bumped their estimate of Q3 growth to a 3.6% annualized pace. Inflation-adjusted consumer spending was tracking at a 3.5% annualized pace, hardly the picture of Americans shutting their wallets.<\/p>\n
However, the bank’s own card data tells a more complex story about where those dollars are going.<\/p>\n
More Economy:<\/p>\n
Goldman Sachs rethinks U.S. economy as interest rates stay higher<\/p>\n
Heating bills expected to jump by $1,000 in some U.S. states this winter<\/p>\n
How stocks will react when the catalysts are few<\/p>\n
For the week ended Oct. 10, spending per household on Bank of America credit and debit cards climbed 5.1% from a year earlier. That looks healthy until you start breaking down the receipts.<\/p>\n
Gas-station spending jumped to 25.1%. Spending, excluding gasoline, rose by a more modest 4%. Meanwhile, department-store purchases fell 5.1%, and furniture spending declined 4.7%. Online retail, by contrast, jumped 7.7%.<\/p>\n
Based on my calculation, that puts the gap between gasoline and department-store spending growth at a remarkable 30.2 percentage points.<\/p>\n
Let’s put that in perspective for an ordinary family. <\/p>\n
A bigger bill at the pump doesn’t mean there’s more gas in the tank. And a higher credit-card total doesn’t automatically translate into more groceries, clothes, or furniture coming home.<\/p>\n
That said, it’s important to note that the BofA’s figures reflect its own cardholders rather than every American household.<\/p>\n
Moreover, not all retailers are struggling. General-merchandise spending rose to 5.7%, another sign that consumers are making different choices about where to shop.<\/p>\n
Strong consumer spending and persistent inflation underpin Bank of America’s Fed forecast.<\/p>\n
picture alliance \/ Getty Images<\/p>\n
Lower-income wages are recovering, but household debt tells another story<\/p>\n
The more encouraging part of the report was that the bank believes the gap between higher- and lower-income Americans is narrowing, at least when it comes to paychecks. <\/p>\n
In September, after-tax wage growth for lower-income households reached 4.5% year over year, according to the bank’s account data. Middle- and higher-income households saw a 3.8% increase. That’s a 0.7-percentage-point advantage for families that have fallen behind.<\/p>\n
Some improvement points to lower tax withholding, not necessarily bigger raises. But BofA also points to stronger hiring and broader job growth. Spending by lower-income households has picked up, too, suggesting consumer demand isn’t resting entirely on wealthier shoppers.<\/p>\n
That’s good news, but it’s important to understand that it isn’t the whole picture.<\/p>\n
Stock-market gains continue to favor affluent families, who own more financial assets. A household watching its investments appreciate has a cushion that someone relying almost entirely on wages may lack.<\/p>\n
The Federal Reserve’s 2025 Survey of Consumer Finances underscores that divide. BofA notes that the overall debt-payment-to-income ratio rose two percentage points to 11.9%. Among families with debt, the share spending more than 40% of income on debt payments climbed from 8.4% to 11.1%.<\/p>\n
Housing makes matters even tougher. The median home was valued at more than 4.5 times median family income.<\/p>\n
To me, a raise can look much bigger on paper than it feels after bills arrive. More take-home pay helps, but loan payments and everyday expenses can absorb the improvement.<\/p>\n
That’s why improving wages and financial security aren’t necessarily the same thing. Moreover, BofA sees another potential obstacle ahead: more Federal Reserve rate hikes.<\/p>\n
BofA expects 2 more Fed hikes as Americans struggle with borrowing costs<\/p>\n
The “costly catch” is that a stronger economy may give the Federal Reserve room to raise interest rates.<\/p>\n
In its Oct. 16 report, BofA maintained a forecast for two more quarter-point rate hikes, one in October and another in December. That would put the federal funds target range at 4.25% to 4.50%, where the bank expects it to remain through 2027.<\/p>\n
At the heart of the issue is that with growth remaining resilient, hiring is holding up, and inflation hasn’t cooled fast enough. <\/p>\n
Consumer prices increased 0.6% in September, pushing annual inflation to 3.7%, up from 3.4% in August, as reported by Reuters. In particular, wholesale prices surged an even sharper 1.3%, the biggest monthly increase since March 2022.<\/p>\n
Speaking at the IMF meetings in Bangkok on Oct. 16, Fed Chair Kevin Warsh acknowledged that central bankers everywhere were hearing the same thing about “the surge in prices.”<\/p>\n
Higher rates put pressure on variable-rate debt, new-car financing, and credit cards. Mortgage rates don’t mechanically follow the Fed, and existing fixed-rate mortgages wouldn’t change.<\/p>\n
Moreover, BofA acknowledges the Fed could raise rates more slowly. That said, I’ll be watching the Oct. 27-28 meeting, inflation, employment, and consumer spending. <\/p>\n
The economy might be strong enough to withstand higher rates. The question is whether families are.<\/p>\n
Related: Walmart, Target face a new price problem as costs surge<\/p>\n
#Bank #America #sees #costly #catch #America039s #strong #economy<\/p>\n","protected":false},"excerpt":{"rendered":"
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