Brace For Impact: Small Business Spending Suddenly Tumbles, First Annual Drop Since Jan 2021

One week ago we showed that in a dramatic reversal of recent “strong consumer” trends, the latest debit and credit card data from Bank of America showed that US household spending just hit a brick wall, dropping -1.2% for the first time since February 2021, where the highlight was a continued slide in service spending (which until recently had been driving overall spending growth) to just +0.9% YoY, and about to turn negative.

Just as ominously, the data showed that contrary to a rebound in retail sales and continued strong wage “data” from Biden’s BLS, the spending weakness was actually driven by the higher-income cohort whose spending remained below lower- and middle-income households and, moreover, higher-income households spent less in April compared with one year ago.