Bank of America Boss Says Consumers, Businesses Are Cutting Back ✂️

U.S. consumers and businesses have become more cautious about spending this year due to elevated inflation and interest rates, according to Bank of America CEO Brian Moynihan.

He noted that both households and small- to medium-sized businesses are slowing their purchase rates for a variety of goods and services.

Slowing Spending 📉
Consumer spending through card payments, checks, and ATM withdrawals has grown about 3.5% this year, reaching roughly $4 trillion. This is a significant slowdown from the nearly 10% growth rate observed in May 2023.

“Both of our customer bases that have a lot to do with how the American economy runs are saying, ‘You know what? I’m being careful, slowing things down,’” Moynihan said at a financial conference in New York.

Inflation & Rates 💵
The slowdown began last summer and aligns with the low-growth environment experienced from 2016 through 2018. Consumers and businesses are dealing with higher inflation and borrowing costs, which remain elevated even nearly a year after the last Federal Reserve rate increase.

Consumer Behavior 🛒
Consumers continue to face high prices for goods and services. Food shoppers are visiting more store locations to find deals, with Moynihan noting, “They’re going to three grocery stores instead of two.”

The growth in overall spending is now primarily driven by travel and entertainment, while spending on other items has moderated, except for insurance payments.

Small- and medium-sized businesses are also cautious, with owners hesitant to hire, purchase equipment, or buy software at the same pace as before.

Executive Outlook 📊
Moynihan hopes the Fed will begin cutting rates before the end of the year, and he predicted the U.S. economy will grow at around 2%, avoiding a recession.