Bank of America Sees a “Great Convergence” Across America’s Two Economies

Bank of America says the long-running K-shaped split in the U.S. economy is beginning to narrow, with spending growth across lower-, middle-, and higher-income households converging near 5% year over year.
The bank also sees after-tax wage growth for lower-income households accelerating toward 5% over the past two to three months, while lower-income card spending is also growing about 5%. However, the top 5% remains an exception, with spending growth still about 1.5 percentage points faster than the rest, supported by stock-market wealth effects.
BofA says the convergence could be fragile. Its economists noted that the K could widen again, particularly if higher interest rates increase financial stress among lower-income households. The bank currently expects 75 basis points of Fed hikes this year.