Consumers are trading down at the highest level since 2021

Summary

• Consumer confidence has fallen while the Spending Tier Composite (STC) indicates consumers are trading down at the highest level since 2021.
• Households appear to be maintaining spending levels by becoming increasingly value conscious rather than reducing total expenditure.
• Apparel spending shows some of the clearest evidence of consumers trading down, with some households delaying discretionary purchases and shopping closer to need.
• The Spending Tier Composite is derived from credit and debit card spending on four categories: apparel, dining, grocery, and travel.
• The STC methodology ranks stores into premium, standard, and value tiers based on the after-tax median income of shoppers, with each tier assigned a score of 3, 2, or 1 respectively.
• A customer's tier for each category is determined by the tier where they spent the majority of their money over the past 12 months.
• The maximum possible STC score is 12, achieved by spending the majority of money at premium stores across all four categories, while the minimum is 3.
• The dataset includes only active US households with Bank of America checking, saving, or credit card accounts that make a minimum of five transactions per month.
• Corporate card spending is excluded from the analysis, and data is classified using Merchant Categorization Codes mapped to the North American Industry Classification System.
• Household income terciles (lower, middle, higher) are based on quantitative estimates and are periodically re-assessed to reflect factors like wage inflation and social security changes.
• Generations are defined as Gen Z (born after 1995), Younger Millennials (1989-1995), Older Millennials (1978-1988), Gen Xers (1965-1977), Baby Boomers (1946-1964), and Traditionalists (pre-1946).
• The report was authored by Liz Everett Krisberg, Head of Bank of America Institute, and David Michael Tinsley, Senior Economist, Bank of America Institute.
• The materials are provided for general information purposes only and do not constitute investment, legal, accounting, or tax advice.