In July, America's consumer economy demonstrated signs of strength with an overall increase in spending. However, the report reveals a growing divide in wage growth between higher and lower-income households. The lowest-income tercile saw a year-over-year wage growth of only 1.3%, a decline from the previous month. Conversely, higher-income households enjoyed a 3.2% increase. This has resulted in the largest gap in wage growth since February 2021, indicating potential economic challenges despite healthy overall consumer activity and spending increases.
According to the Bank of America Institute's latest report, higher-income households are enjoying accelerating wage growth and increased spending, while lower-income households face slowing pay gains and flat expenditure.
After-tax wages for the lowest-income tercile grew just 1.3% year-over-year in July, down from 1.6% in June, while higher-income wage growth accelerated to 3.2% YoY.
There was a narrowing of wealth inequality and now it's widening. The divergence is quite stark between higher and lower-income Americans.
Total credit and debit card spending per household rose 1.8% YoY in July, the fastest pace since January, indicating overall consumer activity is fairly healthy.
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