U.S. economic growth is strong, and the economy and labor market are finally back to firing on all cylinders following the COVID-19 pandemic. However, rising interest rates and persistently high inflation are threatening the economic recovery, and Bank of America analyst Jeseo Park said Tuesday that Americans aren't seeing eye-to-eye on where the economy may be headed next.
The Numbers: Park said the BofA US Consumer Confidence Indicator (USCCI) readings for the month of April suggest the wealthiest Americans are growing increasingly pessimistic about the U.S. economic outlook.
In fact, positive sentiment among higher-income Americans fell from 37.2% at the end of March to just 28.3% as of April 21. During that same stretch, positive sentiment among lower-income Americans improved from 28.3% to 30.5%.
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Park said the sentiment indicator readings are consistent with Bank of America's internal card data, which indicated a recent uptick in lower-income spending.
"Contrary to popular belief, spending by lower-income households has been holding up quite well despite the surge in inflation," Park said.
Wages: Wage growth so far in 2022 has benefitted low-income earners more so than higher earners up to this point. Park said median wages for the lowest 25% of earners are up 6.1% year-over-year, while wage growth for the top 25% of earners is up just 3.3%.
Overall, Park said consumers still have lingering concerns over the pandemic and the potential for the Ukraine war to cause continued price inflation over the next year. Those concerns certainly seem to be reflected in the SPDR S&P 500 ETF Trust (NYSE:SPY), which is now down 11.2% year-to-date.
Benzinga's Take: The primary difference between sentiment among top earners and bottom earners may be a psychological one. Many low-income earners struggled with shutdowns, mask mandates, childcare and other financial hardships during the worst of the pandemic, while a significant number of higher earners worked remotely and generated huge returns in the stock market.
