2022 was a strong 12 months for client spending, however 2023 brings new challenges

The Bank of America Institute today released new analysis showing that while 2022 was a solid year for consumer spending, the new year brings headwinds for US consumers, including a potentially weaker job market and easing inflationary pressures in the year 2023. Although January and February are typically lighter months, New Year’s resolutions to get well can provide some support for spending.

BofA’s aggregate credit and debit card data shows that 2022 was a strong year for consumer spending, with total card spending per household up 5.9% YoY.

However, there was a distinct difference between retail/merchandise spending and non-retail spending (which includes services such as travel and entertainment); Average year-over-year spending growth for retail in 2022 was 3.7%, compared to a much stronger 10% for services.

2023 begins with consumers still facing higher living costs, particularly from utilities, partly due to a colder December in 2022 than last year. BofA internal data shows that the average utility payment per customer rose 13% year over year in December, even as natural gas prices have fallen more than 50% since peaking in August 2022. And while the labor market remains tight, there are signs of moderation in wage growth. According to BofA internal data, after-tax consumer wages slowed to 2.7% y/y (3-month rolling average) in December from a peak of 8% in April 2022.

Given these trends, a new year often signals a fresh start and good intentions, exemplified by a spike in web searches for “gym memberships” each January. BofA internal data shows that between 2010 and 2019, per-household credit and debit card spending at health clubs rose sharply in January of each year after being relatively low during the winter holiday months. However, through December 2022, card spending per household at health clubs remained 35% below pre-pandemic levels. Part of this weakness may be due to the rise of in-home fitness, which has gained popularity since the pandemic due to brain drain from city centers and a preference for social distancing, particularly among older generations.

Other highlights of the Consumer Checkpoint are:

  • Total credit and debit card spending per household increased by 5.9% yoy throughout 2022, with the yoy growth rate slowing to 2.2% in December.
  • Total spending on credit and debit cards, which accounts for over 20% of total payments, rose 4.5% year over year in December as total payments across all channels (Automated Clearing House (ACH), Bill Pay, credit and debit cards, wire transfers ) grew , person-to-person, cash and check) up 1.4% YoY.
  • In 2022, home fitness spending (based on cards and ACH) accounted for an average of 16% of total fitness spending, up from 24% in 2020 but up from 2019’s 11%.

“After a solid 2022, we expect consumers to feel the weight of 2023. For now, though, they’re going to the gym in good financial shape,” said David Tinsley, senior economist at the Bank of America Institute. “With the year just beginning, a reduction in cost of living pressures and some easing in the labor market are expected to play a large role in determining consumer spending trajectories.”

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