For two years Bank of America's card data showed higher-income households outspending lower-income ones by a point or two every month. In August both groups grew discretionary spending at 5.7%.
The K-shaped economy — the idea that the top and the bottom have been pulling apart — has been the standard description of the American consumer. David Tinsley says his own data no longer supports it.
"Discretionary spending growth in August was about 5.7% for higher income consumers, 5.7% for lower income consumers. So that K has largely closed."
Tinsley is a senior economist at Bank of America, which sees wages arriving in customers' accounts and card spending leaving them, and he joined the programme from London.
The full segment is covered here so you can skip it.
Here are the 6 numbers that matter.
👤 Guest: David Tinsley, Senior Economist at Bank of America, speaking from London
🎙️ Hosts: Tom Keene and Paul Sweeney, who anchor Bloomberg Surveillance on Bloomberg Radio
👥 Also on: Dan Ives of Yorkville & Ives, Lori Calvasina of RBC Capital Markets and Naomi Fink of Amova Asset Management, in separate segments of the same programme
📰 Published: 14 September 2026 on the Bloomberg Surveillance podcast feed
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ length not available
Key Takeaways
Bank of America's August card data shows spending up 4.5% year over year and 0.9% on the month
He expects a very good retail sales print this week
The gap between high- and low-income spending has closed after two years of the higher earner leading by one or two points
Two things are lifting lower-income take-home pay: a fiscal hangover in tax withholdings, and a labor market where people move jobs for bigger raises
Most of the consumer is insulated from short-term rate rises because of fixed-rate mortgages
Millennials and Gen Z are the exception, without the housing equity older generations built up
The real risk to consumption is not the hike itself but an equity selloff reversing the wealth effects
Bank of America's economists have had a longstanding call for a hike at this week's meeting
1. A Very Good Retail Print
Tom Keene introduced him by way of the bank's consumption work — which he traced to what he called the seminal work of Michelle Meyer — and asked whether the consumer is genuinely buoyant.
Tinsley's answer was the latest month, with both the annual and the monthly figure. "Absolutely. I mean, just if you look at our latest August data, spending was up four and a half percent year over year. That's a very good number. On the month, it rose 0.9. Should be a very good retail sales print this week."
The reason the bank's view is worth having is the plumbing, and Keene said so. "You folks at Bank of America with your credit card business and your consumer business, nobody's got a better view of the consumer than you guys."
2. The K Has Largely Closed
The old pattern held for two years and was consistent month to month. "For about two years until a couple of months ago, we were talking month in, month out about a higher income consumer outspending the lower income consumer, often a margin of one or two percentage points."
What changed is at the bottom, not the top. "The last couple of months, we saw a marked acceleration of the lower income consumer spending growth. Right now, they're pretty much neck and neck."
The August figure is identical to a decimal place. "Discretionary spending growth in August was about 5.7% for higher income consumers, 5.7% for lower income consumers. So that K has largely closed."
Keene's reaction was disbelief about the funding. He said he is not seeing wage growth that good relative to inflation
3. Where the Money Came From
Tinsley's evidence is the deposit side, not a survey. "Well, you know what we see in our data? And we see wages coming into people's accounts." The bank sees an acceleration in after-tax wage growth for lower-income consumers
The first leg is fiscal, and it is a hangover rather than a new stimulus. "Basically, tax withholdings are lower this year for many people, particularly if you're an overtime or a tip earner. And so, that's boosting take-home pay."
The second leg is job mobility at the low end. "Second is we see some signs that the labour market at the lower end has improved. People are moving around more. They're getting bigger raises when they move."
4. A Hike Is the House Call
Asked what the call is for this week's Federal Reserve meeting, he deferred to his colleagues and did not hedge on their position. "Well, our economists at Global Research, they've had a longstanding call for a hike this week."
He noted the market has moved around on it and the house has not. In his phrasing, they have been on the money for a hike for some time
5. Cooling the Nominal Boom
Keene's question was how nominal GDP comes down constructively while keeping the consumer buoyant — whether that means pulling inflation down or taking real growth back as well.
Tinsley expects the consumer to do part of the work and not all of it. "I'm guessing you're going to see some cooling in the consumer and that's going to do some of the work. Probably not all of the work by any means."
The reason it cannot do all of it is the other engine. "You know, the economy is a dichotomous beast at the moment being driven by this AI boom too."
The wealth effect is what makes this circular, and he said so plainly. The higher-income consumer, who drove spending growth for a long period and still matters, has been stoked by wealth effects — "So you've got to see and that higher income consumer is of course been stoked by wealth effects So, you know, there's a circularity here, but you've got to see some slowdown."
The category running hottest is the discretionary one. "I mean Leisure and travel related spending show the largest improvement since January"
The World Cup shows up in the data by geography. "Yeah. I mean, over the World Cup, for example, we saw really strong spending data in the host cities." He noted airfare spending is holding up, some of that price, and that people are not pulling back despite the increases
His summary of the leisure complex: "Restaurant spending, you know, broader leisure spending, all looking relatively positive, I'd say."
6. Immune to Short-Term Hikes
Keene asked what a Federal Reserve hike means for the consumer who is nowhere near the US Open and is trying to reach next month's paycheck.
The answer is that the transmission is weak, for the same reason it was weak on the way up. "Essentially, a large chunk of the consumer is fairly immune from these short-term hikes, just because they're on fixed-rate mortgages."
Who it does hurt is generational. "So, you know, in our data, the millennials and the Gen Z are probably in a tighter spot than the older Gens who've got the wealth effects, who've got the housing, and got the equity in that housing that's ramped up over decades."
His base case is that spending absorbs it. "I wouldn't expect too big a pullback in consumer spending from a couple of Fed hikes. I think the consumer will wear that."
The channel he is actually watching is the stock market. "And if the equity market sells off as a result of that, then these wealth effects might dissipate, go into reverse even."
Tinsley's bottom line is that the lower-income consumer has caught up on spending growth for reasons that are largely fiscal and partly labor-market, and that a couple of rate hikes will not break consumption unless equities fall far enough to take the wealth effect with them.
Bonus Insights
The segment's running joke was the price of fruit at the US Open. Keene asked whether honeydews are a line item at $23 and reported seeing a woman carrying four of them; Tinsley played along: "I think they were. Boy, people were stacking those cups up, that's for sure."
Keene detoured into sport twice — the NFL weekend and a good one for the New York teams, then the Premier League, where he announced "I'm not shaving until Tottenham scores."
Tinsley was not in the studio and had to say so. Asked whether he is based in New York, he answered "I'm in London." Keene invited him to come back in person
Products, Companies & Tools Mentioned
Bank of America (The source of the card and deposit data behind every figure in the segment, and the house with a standing call for a hike this week)
Bank of America Institute (Where the consumer spending research Tinsley discusses is published)
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