According to analysts at the Bank of America Institute, U.S. consumers have been pushed further into a value-focused mindset, and it is unclear how long this will last.

Analysts at the institute took deposit account data along with credit and debit card spending data to create a proprietary Spending Tier Composite, which they described as a proxy for trade down activity. The index reached its lowest level since 2021, “suggesting more households are shifting spending to value-tier merchants.”

What makes the spending trends worrisome is how it cuts across several segments, the report noted.

“Apparel and dining show clear signs of consumers trading down, but when it comes to travel, some households may be opting out of trips entirely rather than shifting to lower-cost options,” the report’s authors said. “Millennials are leading the move toward value-oriented spending. Since 2022, Millennials’ spending tier has fallen faster than that of Gen X or Baby Boomers, particularly in apparel and groceries, suggesting greater sensitivity to rising costs.”

The analysts said consumers exhibit significant flexibility in apparel during inflationary periods by migrating across brands and retail channels or even postponing discretionary buying. They noted that this manifests clearly in their data, where apparel share-to-total consumption (STC) has trended down substantially over the past several years.

The research showed that dining STC has experienced a comparable contraction relative to its 2024 average.

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