$BTC Bank of America: Consumer spending unexpectedly soared in July, and 'terrifying data' may greatly exceed expectations!
At 20:30 Beijing time on Friday, the U.S. will release the monthly retail sales for July, with the market expecting this data to record 0.50%, down from the previous value of 0.60%. However, Bank of America's credit card data suggests that retail sales may increase by 0.8% month-on-month, exceeding the current market consensus.
According to the latest credit card data report released by Bank of America, total credit card spending by American households grew by 1.8% year-on-year in July, marking the highest growth rate this year, significantly up from the 0.2% increase in June. After seasonal adjustment, household month-on-month spending increased by 0.6%, continuing the upward trend from June's 0.4%.
The recovery in consumption is showing a comprehensive blossoming trend, with both retail and service spending contributing to growth. Service spending rebounded after three consecutive months of decline, with a month-on-month increase of 0.9%, the largest since April 2024. Air travel and accommodation spending have significantly rebounded, dining consumption remains stable, and the weakness in discretionary spending has somewhat eased.
However, there are hidden concerns behind the data. Amazon's 'Prime Day' and other online promotional events have been extended, driving retail data to spike in the short term, with back-to-school spending also delayed until concentrated release in July. Bank of America warns that this type of 'event-driven' consumption may reverse in the coming months.
Additionally, the shadow of tariffs has stimulated ahead-of-schedule consumption. Before the deadline for reciprocal tariff negotiations on August 1, some consumers may have made early purchases to avoid price increases. Data shows that the increase in the number of transactions in July was lower than the increase in amount, indicating the impact of rising prices.
Income disparity is showing signs of intensification. The after-tax wage growth of low-income households has slowed to 1.3%, marking the largest gap with the 3.2% growth of high-income groups since February 2021. Their credit card spending has stagnated, while the spending growth of middle- and high-income groups reached 1.0% and 1.8%, respectively.
Regarding the upcoming retail sales data, Bank of America's economists predict that retail sales will record a month-on-month increase of 0.8%, higher than market expectations; retail sales excluding automobiles will increase by 0.3% month-on-month, in line with market expectations; core retail (excluding gasoline, building materials, and dining) may grow strongly by 0.6%, surpassing general market expectations. However, the bank warns to distinguish between 'price factors driven by tariffs' and 'actual consumption growth.'
Bank of America points out that there are structural risks underlying the resilience of the U.S. economy. From the data, the number of households applying for unemployment benefits has surged year-on-year.
The credit card overdraft rate among low-income groups is accelerating; although the proportion of emergency withdrawals from 401(k) plans remains at a low 0.7%, signs of pressure are beginning to emerge.
Bank of America summarizes that, while middle- and high-income groups support the U.S. consumption engine, accounting for 85% of total consumption, their strong spending is reassuring. However, the widening 'K-shaped divergence' may pose long-term socioeconomic risks. Currently, the overall financial health of consumers remains better than in 2019, but the Federal Reserve may pay more attention to the living conditions of the bottom 40% of the population when assessing the economy.
