As inflation remains elevated, spending habits have changed, especially for millennials.
“Consumers are still spending, and they’re adapting to inflation, but adapting is not the same thing as escaping it,” Taylor Bowley, an economist at the Bank of America Institute, told Business Insider. “They’re still finding ways to stretch their budgets by trading down where they have those choices.”
The Bank of America Institute created a spending tier composite using consumer spending data across four categories — apparel, dining, grocery, and travel — and the median incomes of shoppers at premium, standard, and value stores to examine changes in spending. The composite has been trending downward over the past few years, reflecting the most consumer trading down since 2021.
That means “more households are shifting spending to value tier merchants” rather than high-end establishments and experiences, the new Bank of America Institute report said.
Affordability has been a hot topic this year. Gas prices have surged since the start of the Iran war. Mortgage rates have spiked since the start of the year, pushing homeownership out of reach for many. The Fed hiked interest rates in September to try to combat stubborn inflation but held rates steady in October as they seek more data.
Have you had to adjust your budget, dip into your savings, or take on another job as inflation remains elevated? We’re looking to hear from people about their experience in the US economy. Reach out to this reporter to share at [email protected].
Affordability concerns were also reflected in the University of Michigan’s consumer surveys.
“About 57% spontaneously mentioned that their living standards have been eroded by high prices, the highest seen since May and up from 46% in February, just prior to the Iran conflict,” survey director Joanne Hsu said in the latest release.
The bank’s data showed trading down is more prevalent in apparel and dining. Travel, on the other hand, has seen an upward shift in the bank’s spending tier metric.
Bowley said card data shows airline spending growth has been robust, but largely because of higher fares as transactions dip.
“There has recently been renewed strength in hotel spending growth as well as robust cruise spending — the latter often a budget-friendly way to travel,” the report said. “Still, the increase in Bank of America’s travel STC may reflect lower-budget travelers forgoing trips rather than becoming less price conscious given the decline in airline transactions growth in the past several months.”
The report said millennials are trading down, likely due to the demands of early middle age. Many are parents paying for childcare on top of all the other costs they have to cover. Bowley said this generation has faced higher housing costs and auto payments. Gen Z has consistently had a lower composite score than older generations, which the report said likely reflects these consumers having lower incomes and fewer accumulated assets. Meanwhile, baby boomers had the highest composite, which has moved far apart from a dip during the pandemic.
“They do seem to have a pretty steady way of how they’re going about shopping,” Bowley said.
Recent earnings calls also highlight how consumers are dealing with affordability challenges.
Scott McPherson, CEO of Performance Food Group, said that “consumers remain value-conscious and selective with discretionary spending” and that gas prices around $4 on average are adding pressure to households. Meanwhile, Ryan Grimsland, CFO at Advance Auto Parts, said in the company’s earnings call that hard parts categories are still soft as value-conscious consumers defer big repair projects.
People with more money are also looking for deals.
“Lower-income customers are prioritizing needs over wants, shopping closer to need, and in many cases delaying discretionary purchases where they can, while higher income customers continue to trade down in search of value,” Eric van der Valk, CEO of Ollie’s, said in the company’s earnings call.
Bowley, the Bank of America Institute economist, said that the bank’s data shows wage growth remains positive.
“That kind of helps absorb some of the rise in prices, but that can only go so far, especially when it comes to things like maybe housing,” Bowley said.
November 14, 2026: This story has been updated to reflect that Ryan Grimsland is the CFO of Advance Auto Parts.
