Bank data has indicated that consumers have been financially resilient despite rising inflation and concerns about a possible recession. The banks' customers are reportedly continuing to spend freely using credit cards and other transaction methods.
What Inflation?
While on a conference call discussing third-quarter results at the company, Brian Moynihan, CEO of Bank of America, said, “Analysts might wonder whether the talk of inflation, recession and other factors could [result] in a slower spending growth. We just don't see [that] here at Bank of America.”
Bank of America reportedly saw a 10% increase in transaction volume in September and in the first half of October. Moynihan says that although some of that increase can be attributed to inflation, the number of transactions also rose by 6%.
Related: FBI Seizes $86 Million From Safe-Deposit Boxes, “Permanently Confiscated”
Fill Thy Coffers
Customer account balances have also remained consistently higher than they were during the pandemic. Moynihan states that this is an indicator that consumers are in a good position to continue spending. Even customers' accounts with the smallest balances had five times more money in them than before the pandemic.
Consumer credit also allegedly remains pristine. Late payment metrics are reportedly still below pre-2020 averages. Moynihan says these numbers indicate that customers are having little difficulty keeping up with their debt.
“We're just now seeing [a] gradual move off these lows in early-stage delinquencies; late-stage delinquencies are still 40% below pre-pandemic,” Moynihan said.
One Pandemic Positive
Consumers were reportedly able to bolster their savings accounts during the pandemic, which has greatly contributed to their financial health in 2022. “Consumers are in good shape. They're spending money. They have more income,” Jamie Dimon, chief executive of the country's largest lender JPMorgan, told analysts last week.
JPMorgan reported in July that combined credit and debit spending had increased 15% from the second quarter of 2021.
What Recession?
Citigroup CEO Jane Fraser stated that there is very little evidence in the data to support the theory that the U.S. is on the verge of a recession. “It's just an unusual situation to be entering into this choppy environment when you have a consumer with strong health,” said Fraser.
Data gathered in June and reported in July showed that the U.S. economy added more jobs than was expected in June; however, because gross domestic product (GDP) contracted so much in the first quarter, the United States could still be headed for recession.
All Good Things Come to an End
Bank executives believe that the growth seen in consumer spending will start to cool off here in the second half of the year. Inflation, high interest rates, and economic fears will weigh on consumer confidence and cause them to pull back their spending, according to the executives.
“We see the impact of inflation and higher non-discretionary spend across income segments,” said JPMorgan's Chief Financial Officer Jeremy Barnum. “The average consumer is spending 35% more year-on-year on gas and approximately 6% more on recurring bills and other non-discretionary categories.”
Wells Fargo has reported that spending on non-essentials such as clothing and home improvement has gone down into double-digit figures. Overall credit card spending has also started to cool off from being up 28% compared to last year.
Shifting spending habits, rising interest rates, inflation, and the end of Covid-19 federal assistance means that consumers' savings are now starting to shrink. “For certain cohorts of customers, we have seen average balances steadily decline to pre-pandemic levels following the final federal stimulus payments early last year,” said Wells Fargo's Chief Financial Officer Mike Santomassimo.
JPMorgan's CFO, Jeremy Barnum, claims that as spending overtakes incomes, cash buffers are slowly starting to deteriorate despite still being above pre-pandemic levels.
More Articles From the Wealth of Geeks Network:
- The Worst of Inflation Might Be Over Says Biden Admin
- Chase Aims to End Their $5 Billion Credit Card Business, CEO Will Fire Anyone Who Gets in the Way
This article was produced and syndicated by Wealth of Geeks.
source https://wealthofgeeks.com/consumer-spending-is-still-healthy/
No comments:
Post a Comment