Key facts
- The Bank of America Institute's spending tier composite has trended downward over several years, reflecting the most trading down since 2021.
- Institute economist Taylor Bowley said wage growth remains positive but can only absorb so much of the rise in prices.
- The University of Michigan survey found 57% mentioned high prices eroding their living standards, up from 46% in February.
The Bank of America Institute's spending tier composite, drawn from consumer spending across apparel, dining, grocery and travel and the median incomes of shoppers at premium, standard and value stores, has trended downward over several years, reflecting the most consumer trading down since 2021. The institute said in a report that more households are shifting spending to value tier merchants rather than high-end establishments and experiences. Trading down is most prevalent in apparel and dining; travel has seen an upward shift in the institute's spending tier metric.
Taylor Bowley, an economist at the Bank of America Institute, said the institute's data show wage growth remains positive, which helps absorb some of the rise in prices but "can only go so far, especially when it comes to things like maybe housing." Bowley said airline spending growth has been robust in the institute's card data, but largely because of higher fares as transactions dip.
The University of Michigan's consumer surveys showed about 57% of respondents spontaneously mentioned that high prices had eroded their living standards, the highest since May and up from 46% in February, according to survey director Joanne Hsu.
On recent earnings calls, Performance Food Group CEO Scott McPherson said "consumers remain value-conscious and selective with discretionary spending," and Advance Auto Parts CEO Ryan Grimsland said hard parts categories are still soft as value-conscious consumers defer big repair projects. Ollie's CEO Eric van der Valk said lower-income customers are prioritizing needs over wants, while higher income customers continue to trade down in search of value.