By Teresa Rivas

Consumers are stressed about inflation, and they've been engaging in retail therapy.

Retail sales have continued to rise even as consumer sentiment remains not far off all-time lows. Strategists have attributed that to a number of factors, including the K-shaped economy -- in which wealthy Americans keep spending -- the use of tax refunds, and consumers dipping into savings to pay for things like gas that have gone up in price but that they can't stop purchasing.

Yet the latest spending data from Bank of America shows that despite all the pressures heaped on consumers after years of inflation, they're still spending on a variety of things, beyond essentials.

Total aggregated BofA credit and debit card spending from May showed household spending increased 5.1% from the year-ago period, the largest gain in nearly four years, on top of April's 4.8% rise. Gas was of course a factor, but even excluding that burden, total spending was up 3.9%, compared with 4% in April. Seasonally adjusted spending per household rose 0.1% month over month, following rises for the past three months.

Higher energy prices are making their way through the supply chain, which can explain some of the higher spending, but not all of it, writes BofA Senior Economist David Michael Tinsley.

"Within services, overall spending is being driven more by discretionary than by necessity spending," he said.

Spending on travel, tourism, and restaurants stands out in this regard. Certainly some of that is attributable to the World Cup, but it's still worth noting that retail (which excludes gas and dining out) "is contributing almost the same amount toward overall spending growth as services including restaurants," Tinsley notes. "Notably, this is [the] first time this has happened since February 2021, when retail spending outpaced services spending as consumers remained socially distanced during the pandemic."

Electronics, furniture and clothing were standouts among retail -- not just the bare necessities.

There are caveats, aside from the World Cup potentially skewing the numbers. Some spending may have shifted from cards to other forms of payment and savings rates are falling (albeit from somewhat elevated levels).

Moreover, consumers are making more trips to the store rather than buying more, which suggests shoppers may be favoring smaller, more frequent purchases as they shop around for bargains. Lower- and middle-income households aren't spending at the same clip as their wealthier peers, and there's data to suggest 1% of households may have stopped transacting altogether, representing a small subset of Americans who are under the greatest pressure.

Yet even the two legs of the "K" in the K-shaped economy aren't as far apart as they once were. Lower-income households spent more 4.1% than last year in May, while those in the middle spent 4.3% and the higher income cohorts saw 5.4% growth.

That means the "gap between higher-income and other households narrowed to its lowest level since June 2025," writes Tinsley. "At the same time, we have seen a similar narrowing in the after-tax wage gap."

May saw wage growth for the wealthiest Americans slow to 5.6% year over year, while lower- and middle-income wages grew 3.1% and 3.5%.

That suggests the situation may not be as bad for consumer stocks as investors have feared. The State Street SPDR S&P Retail exchange-traded

fund is up less than 4% in 2026 and the   State Street Consumer Discretionary Select Sector SPDR ETF is in the red year to date, even as the S&P 500 is up more than 10%. Those broader market gains are helping the most well-heeled American feel confident in their spending, while the ongoing strength of the labor market is another tailwind. 

Likewise, Ironsides Macroeconomics Managing Partner Barry Knapp writes that consumer companies' earnings could be further elevated by tariff refunds. Right now, consensus calls for companies in the discretionary sector to earn $50.7 billion in the second quarter, up just $2.5 billion sequentially, while staples are expected to see earnings climb $1.6 billion to $32.8 billion.

"It doesn't seem like much of reach to assume refunds will have a significant impact on the rate of change of earnings growth and profit margins," he writes.

A lot has changed in recent years, even beyond inflation's grip on prices, but it seems shopping remains one of America's favorite pastimes.

Write to Teresa Rivas at teresa.rivas@barrons.com

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June 15, 2026 14:32 ET (18:32 GMT)

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