Bank of America: K-Type Dividend Erodes Middle-Class Spending Growth

Bank of America (BAC-US) analysis reveals the K-type economy's consumption divide is intensifying and spreading to the middle class, with the widest income-based spending gap since mid-2022. January data shows high-income households' spending rose 2.5% YoY, middle-income 1.0%, and low-income 0.3% YoY. The narrowing middle-income wage gap relative to high-income households approached its widest in five years. Consumers are shifting to discount retailers and downsizing to smaller, less expensive rentals in cheaper regions. Tax refunds from the 2025 tax year and overall financial stability are expected to partially support consumption, per the analysis based on sign-on and credit card transaction data and bank account activity.