Commercial Banking

Bank of America data finds that 2022 was a solid  year for consumer spending, but the new year brings new challenges

Bank of America data finds that 2022 was a solid  year for consumer spending, but the new year brings new challenges

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Bank of America Institute released new analysis today which shows that, while 2022 was a solid year for consumer spending, the New Year brings with it cross-currents for U.S. consumers, including a potentially weaker job market and easing inflation pressures in 2023. Although January and February are typically lighter months, New Year resolutions to get healthy may provide some support for spending.

BofA aggregated credit and debit card data indicates 2022 was a strong year for consumer spending, with total card spending per household up 5.9% year-over-year (YoY).

There was a stark difference, however, between retail/goods spending and non-retail spending (which includes services such as travel and entertainment); average YoY spending growth for retail in 2022 was 3.7% compared to a much stronger 10% in services.

2023 starts with consumers still facing higher living costs, especially utilities, partially driven by a colder December in 2022 than the prior year. BofA internal data shows that the average utility payment per customer increased 13% YoY in December, even as natural gas prices have dropped by more than 50% since the peak price levels in August 2022. And while the labor market remains tight, there are signs of wage growth moderation. According to BofA internal data, consumer after-tax wages decelerated to 2.7% YoY (3-month moving average) in December, from the high of 8% in April 2022.

With these trends in mind, a new year often signals a fresh start and good intentions, illustrated by an uptick in web searches for “gym memberships” each January. BofA internal data shows that between 2010 and 2019, credit and debit card spending per household at fitness clubs surged in January of each year, after relatively low levels during the winter holiday months. However, as of December 2022, card spending per household at fitness clubs remained 35% lower than pre-pandemic levels. Part of this weakness could be due to the rise of in-home fitness, which gained popularity since the pandemic because of migration out of city centers and a preference for social distancing, especially among older generations.

Other highlights of the Consumer Checkpoint include:

  • Total credit and debit card spending per household was up 5.9% YoY for all of 2022, with the YoY rate of growth slowing to 2.2% in December.
  • Overall total credit and debit card spend, which makes up over 20% of total payments, was up5% YoY in December, as total payments growth across all channels (Automated Clearing House (ACH), Bill Pay, Credit and Debit Card, Wires, Person-to-Person, Cash and Check) increased 1.4% YoY.
  • In 2022, in-home fitness spending (based on both cards and ACH) accounted for 16% of total fitness spending on average, down from 24% in 2020 but higher than the 11% in 2019.

“After a solid year in 2022, we expect the consumer to feel the weight of 2023. However, for now, they are heading to the gym in OK financial shape” said David Tinsley, senior economist for Bank of America Institute. “While the year is just beginning, a reduction in cost-of-living pressures and some easing in the labor market are expected to play a big role in determining the evolution of consumer spending.”

About the Consumer Checkpoint

Consumer Checkpoint is a regular publication from Bank of America Institute. It aims to provide a holistic and real-time estimate of US consumers’ spending and their financial well-being, leveraging the depth and breadth of Bank of America proprietary data. Such data is not intended to be reflective or indicative of, and should not be relied upon as, the results of operations, financial conditions, or performance of Bank of America.

See the Consumer Checkpoint for methodology and definitions.

About Bank of America Institute

Bank of America Institute is dedicated to uncovering powerful insights that move business and society forward. Established in 2022, the Institute is a think tank that draws on data and analyses from across the bank and the world to provide timely and original perspectives on the economy, Environmental, Social and Governance (ESG), and global transformation. The Institute leverages the depth and breadth of the bank’s proprietary data, from 67 million consumer and small business clients, 54 million verified digital users, $3.8T in total payments in 2021 and $1.4T in consumer and wealth management deposits. From this robust data set, the Institute provides a unique perspective on the health of the economy. It also elevates thought leadership from throughout the bank that addresses long-term trends and shares these findings with the general public.

Bank of America

Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 68 million consumer and small business clients with approximately 3,900 retail financial centers, approximately 16,000 ATMs and award-winning digital banking with approximately 56 million verified digital users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business households through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and approximately 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

 

Treasure Coast Business is a news service and magazine published in print, via e-newsletter and online at tcbusiness.com by Indian River Media Group. For more information or to report news email [email protected]

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FINDING THE BEST BANKER FOR BETTER BUSINESS

As a business owner, it is critical to maintain a relationship with a bank that can help you navigate the treacherous waters of entrepreneurship.

How do you select the bank that you want to build a relationship with?

As banks continue to merge and grow, community banks become fewer and fewer. It is important to research a bank and a banker to form a long relationship. Today’s technology allows the business to not focus so much on the actual location of the bank but rather the potential for a long-lasting banking relationship.


BUSINESS OWNERS SHOULD USE THE BUSINESS BANKING SPECIALIST AS A CONSULTANT JUST AS THEY SHOULD USE THEIR CPA AND THEIR ATTORNEY. HAVING A SUPPORT TEAM WILL ENSURE THAT YOU ARE MAXIMIZING ALL RESOURCES AVAILABLE.


Talk with other like companies to see where they bank. Specifically talk to them about what they like about their bank or banker and ask if they have a personal business banker that they work with. Most often the large mega banks do not have a person that business owners can work directly with. This can be problematic for a growing business.

Business owners should meet with potential business bankers and interview them to ensure that they understand the current needs and the goals of your company. After you make this important decision choosing a bank and banker, it is important to communicate often to ensure he or she understands where you are in the business as well as where you are heading in the near and distant future.

Some people believe that it is only important to talk to their bank when they have a need. That just isn’t true. As a relationship banker for more than 30 years on the Treasure Coast, I find that talking with my clients often helps me to become more proactive in making recommendations to the business owner.

FORMING A RELATIONSHIP
Operating a business during a booming economy is just as tricky as navigating during a slowing economy. The challenges are different, but both can put you out of business. Managing growth is a common mistake that businesses make that puts pressure on the cash flow of a company.

For example, some new business owners jump into selling a product without realizing that the invoice will need to be carried for sometimes up to 90 days. Working with your community banker can help you put a line of credit in place that will help you bridge the gap between the sale and the collection of the invoice. That same line of credit can help you during a slowdown as you use the line for support during the slower months.

Your business banking specialist can also advise you when purchasing equipment. What type of equipment should you finance and how long should you finance the equipment? Equipment should be amortized based on the actual life expectancy of the equipment and technology as well as the need for future equipment.

Your business banker will also want to discuss a succession plan for the company. Who will take over in the event of your death? Not a pleasant conversation, but for many companies the owner of the company is a key player in the daily operations. Will the company be passed down to the next generation or will the company be sold? Your banker should want to understand your plan, and that includes the overall forecast even after your passing.

Business owners should use the business banking specialist as a consultant just as they should use their CPA and their attorney. Having a support team will ensure that you are maximizing all resources available.

Treasure Coast Business is a news service and magazine published in print, via e-newsletter and online at tcbusiness.com by Indian River Magazine Inc. For more information or to report news email [email protected]


Tammy Roncaglione

TAMMY RONCAGLIONE

Senior vice president and St. Lucie community president of CenterState Bank and previously worked with Barnett Bank and Bank of America. She is a founding member of the Treasure Coast Manufacturers Association and is the recipient of the 2019 Pete Hegener Leadership Award from the St. Lucie County Economic Development Council.

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