Bank of America reports that the consumption divide that had persisted for more than a year - often described as K-shaped - has shown signs of contracting and even flipping. According to the bank’s aggregated credit and debit card measures that exclude gasoline purchases, lower-income households now display slightly stronger year-over-year card spending growth than their higher-income counterparts.
The bank said the inflection became apparent over the last two weeks in its card-spend series. The dataset specifically removes gas spending so the observed reversal reflects non-gas purchases on credit and debit cards.
BofA highlights three principal drivers behind the movement:
- Lower-income households tend to be more sensitive to changes in labor income, a factor that may have helped spending if job growth rose or if take-home pay increased following changes to tax withholdings under the OBBBA.
- Gasoline costs fell sharply in June, providing relief to households that devote a larger share of their budgets to fuel; however, the bank notes that gas prices have since moved higher again.
- Base effects also played a role. The gap in spending between higher- and lower-income groups widened materially in June 2025, setting up statistical conditions that made it easier for the gap to narrow and ultimately reverse during June and July of this year.
These dynamics point to a combination of income-side effects and price movements influencing where card dollars are flowing. The exclusion of gas in the primary series highlights underlying retail and services spending trends among income groups.
Markets and observers will have a fresh set of economic data to consider on Tuesday, when reports are scheduled for ADP weekly payrolls, advance goods trade for June, June inventories, May home price indices, and July consumer confidence. Those releases may offer additional evidence on labor conditions and consumer sentiment, which BofA identifies as relevant to the recent spending pattern shifts.
While the bank’s card-data snapshot points to a noteworthy short-term development in spending behavior, it also notes that movements in gas prices and prior base effects have been important contributors to the observed reversal.