Retail Sales Understates Consumer Strength, 'Real' Total Card Spending 11% Over 2-Year Period - BofA

June 10, 2021 9:17 AM EDT

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BofA Securities economist Michelle Meyer says the latest data points toward higher services spending that is mostly not captured in retail sales ex-autos.

Aggregated BAC credit and debit card data shows an increase of 26% in total card spending over a 1-year period. Moreover, there is an 18% gain over a 2-year period for the 7-days period to June 5th.

“Retail sales ex-autos, based on aggregated BAC card data, fell 0.6% mom SA. This pullback reflects some rotation in the consumer basket away from goods and toward services. Note that the only service category included in retail sales ex-autos is restaurants: if we net out the 3.4% mom SA gain in restaurants as well, we would have seen a decline of 1.2% mom SA in retail sales. We can also look at a broader measure: total card spending was up 1.6% mom SA which consisted of the 0.6% mom SA drop in retail ex-auto and a 5.9% gain mom SA in all else. When we look at the 2-year growth rate, retail sales ex-autos has stabilized while total card spending continues to accelerate due to the “other” categories,” the economist said in a note.

For instance, spending in restaurants and in lodging on Memorial Day this year was up 24% and 16%, respectively, compared to 2019.

“Those categories saw relatively more growth over a 2-year period than the prior 4-week trend, suggesting that the Memorial Day holiday incentivized greater spending for both.”

The bank has come up with a proxy for the price deflator (inflation) that measures “real” total card spending. Over the 2-year period, this indicator measures real total card spending of 11% vs. the 18% growth rate in nominal spending.

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