5 signs US consumers will weather the vibecession and keep spending
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- Hard data shows that the US consumer remains strong despite downbeat sentiment, BofA says.
- Confidence has slipped amid macro uncertainty, but US shoppers will weather the bad vibes.
- Air travel, card spending, and tax relief data are among positives to watch.
Consumer confidence is down amid mounting economic uncertainty, but there a signs that US shoppers will probably be just fine.
According to Bank of America, hard data continues to shine a positive light on consumers, even as sentiment measures indicate that spirits are low.
The Consumer Confidence Index cratered to a four-year low this week, raising concerns of a spending slowdown that could ultimately lead to a recession. Disappointing retail sales and lowered outlooks among big box retailers have also added pressure.
Rising tariff rates, an immigration crackdown, and cuts to the federal government all account for economic uncertainty, BofA said.
While these are headwinds, BofA analysts said there are five things that show consumers will weather the vibecession.
Jobless claims
Despite sweeping cuts to the federal workforce, the labor market has stayed solid, with jobless claims returning to low levels after a late-February spike.
"Jobless claims among federal employees are elevated. However, they are down from a couple of weeks ago, and the numbers are too small to move the needle on the broader labor market," the bank said.
Weekly initial jobless claims stood at 224,000 for the week ending March 22. That's below 225,000 expectations, Deutsche Bank said in its own note.
Bank of America
Robust spending
There's no sign that consumer spending is cracking, with total card spending per household up 1.5% annually in the week ending March 22, data from the bank shows.
"Paired with the recovery in retail sales in February, this suggests that the weakness in consumer spending in January was a blip, rather than the start of a broader slowdown," the note said.
Tax refunds
Consumer spending could see a boost in the near term as tax refunds provide a small windfall to many Americans.
Refunds rose 5.3% year-over-year through March 26, suggesting that spending could pick up in this month's data.
"One caveat is that the pickup in refunds might be due to faster processing of returns this year: in that case, any refund bump in spending will get paid back over the next couple of months," the bank wrote.
Bank of America
Balance sheet buffer
BofA dismissed the idea that consumer savings are running flat, instead noting that the household assets-to-liabilities ratio jumped sharply above pre-pandemic levels in the fourth quarter.
The rise of liquid assets, which include checking accounts and money market mutual funds, could serve as a meaningful cushion against inflation pressure that could pick up in the coming months, BofA said.
Air travel
Airport traffic, a data set that lags by just one day, climbed modestly in late March after flatlining since January. Air travel has returned to 2024 levels and is due for a bump in the coming weeks as consumers travel for the Easter holiday.
Earlier this year, dimming airline outlooks fueled vibecession worries, and companies such as Delta were casualties of the worsening mood, with the stock down over 26% for the year.
Bank of America