It said consumers and businesses in the U.S. have become cautious about spending this year due to increased inflation and high interest rates Bank of America CEO Brian Moynihan.
Whether they’re households or small to medium-sized businesses, Bank of America customers are slowing the rate of purchases of everything from hardware to software, Moynihan said Thursday at a financial conference in New York.
Consumer spending through card payments, checking and ATM withdrawals rose about 3.5% this year to about $4 trillion, Moynihan said. That’s a sharp slowdown from the nearly 10% growth rate in May 2023, he said.
“Both of our customer bases that have a lot to do with the American economy are saying, ‘You know what? I’m being cautious and slowing things down,'” Moynihan said, referring to consumers and businesses.
The slowdown began last summer and is consistent with the “very low growth” environment during 2016 to 2018, he said.
Nearly a year after the Federal Reserve’s last interest rate hike, consumers and businesses are grappling with inflation and borrowing costs that remain higher than they are used to. The Fed began curbing inflation by raising its key interest rate starting in March 2022, hoping to slow the economy without plunging it into recession.
Many economists believe the Fed is on track to accomplish the feat, which has helped the stock market reach new highs this year. But consumers are still grappling with higher prices for goods and services, and that’s impacting U.S. companies from McDonald’s to discount retailers as Americans adjust their behavior.
Grocery shoppers are increasingly visiting more stores looking for deals, Moynihan said. “They go to three grocery stores instead of two, that’s one of the statistics we see,” he said.
The now subdued growth in overall spending is supported by travel and entertainment, while “things other than insurance payments have slowed,” Moynihan said. Growth in rental payments has slowed, he noted.
“We have to keep the consumer in the game in the US economy because [they’re] “Such a big part of it,” Moynihan said. “They’re becoming a little more vulnerable, and that’s because of everything that’s going on around them.”
The same applies to small and medium-sized businesses, said the CEO of Bank of America. His company is the second-largest U.S. bank by assets JPMorgan Chase. Moynihan and other bank CEOs have a bird’s-eye view of the economy because of their extensive coverage of households and businesses.
Business owners say, “I still feel good about my overall business, but I’m not hiring as many. I don’t buy gear that quickly. I don’t buy software that quickly,” Moynihan said.
The bank’s economists expect it will take until the end of next year to bring inflation under control and that the Fed will begin cutting interest rates later this year, Moynihan said. The U.S. economy will likely grow by about 2%, avoiding a recession, he added.
Source link
2024-05-30 19:31:31
www.cnbc.com
