The latest Bank of America Institute Consumer Checkpoint report is just out and as always is well worth a glance. The news is mixed. On the positive side of the ledger, US consumers still seem to have a level of room for manoeuvre, evidenced by lower credit card utilisation rates compared to 2019.

Indeed, the ratio of credit card to debit card spending per household for lower- and middle-income households remains below March 2019. For higher-income households, greater credit card usage isn’t generally viewed as a sign of leveraging, but instead a function of higher spending demand.

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But after a strong start to 2023, credit and debit card spending per household moderated in March, to 0.1% year-over-year, the slowest pace since February 2021.

Moreover, sequentially, card spending per household fell by 1.5% in March. Also notable, is the snippet in the report relating to higher-income households and a drop in wages for this segment of 0.5% in March, the first decline in almost three years.

A slowdown in card spending per household is not a huge surprise, given the slowing of wage growth. As Bank of America notes, extraordinary wage growth was one of the main drivers behind the resiliency in consumer spending in 2022. This allowed consumers to keep spending even in the face of higher inflation.

But the prospect of the US falling into a mild recession are on the rise and it will be no surprise if card issuers become increasingly risk averse. A further expected rise in the summer in default rates will only dampen the mood.

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