The consensus headed into this year was that the US consumer would have deeply retrenched by now; instead, consumer spending has been the bedrock of a solid 2023 so far.

Citigroup economists see storms on the horizon. with household available cashflow shrinking rapidly and threatening contraction later this year.

Their model “points to .. a further softening in 2H23. .. this analysis gives more cause for concern as we think about how discretionary spending may play out for the rest of the year.”

Meanwhile, Bank of America is more-focused on the present with the May retail sales report due out on June 15. They see a flat reading on the headline but a strong +0.8% on the control group compared to the +0.3% consensus. Their credit card data showed strong spending on home improvement, furniture, groceries and department stores; offset by weak gasoline sales.

discretionary spending

One warning sign could be falling credit card utilization rates. They're at least 2 percentage points lower across income cohorts than in 2019. Does that reflect high rates? Still-high savings? Or some kind of technological change?