Bank of America has published its latest credit card spending data and the is some concerning news. Card spending per household fell 1.5% m/m in March.
They note that spending was particularly weak in gasoline, furniture, home improvement and department stores. With that, they see a 0.5% decline in the retail sales control group in Friday's report. Compare that with the -0.3% consensus estimate.
Is this a sign of a looming consumer slowdown? Maybe not.
"In our view, the slowdown In Federal tax refunds In March, as reported by the Internal Revenue Service (IRS), contributed to the weakness in spending," BAC writes. "The IRS Issued $84bn of refunds this March, which is $25bn less than the refunds issued in March 2022."
In addition, supplemental food stamp benefits expired in March.
Bank of America forecasts that a recession will begin in the third quarter of this year.
Summary:
- Slowdown in federal tax refunds in March led to weak spending
- IRS issued $25bn less in refunds compared to March 2022
- Average refund size 10% smaller, unlikely to catch up to 2022 levels
- Expiring SNAP benefits may have affected spending
- No clear evidence of regional bank stress impacting spending
- 1Q 2023 retail ex-auto spending growth: 5.2% quarter-over-quarter annualized Weak hand-off for 2Q growth, raising risk of contraction
- Base case: recession starting in 3Q 2023