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Consumers might be squeezed by inflation, but it seems their wallets aren\u2019t tight enough to stop them spending on enjoying a good time. At least, that\u2019s what Brian Moynihan is seeing from the data at Bank of America<\/a>.<\/p>\n But while shoppers are still splurging on experience spending, they\u2019re consciously pulling back on more day-to-day purchases<\/a> such as groceries. And the story is the same on the commercial side, said the CEO, where spending is still there but the purchasing is slowing<\/a>.<\/p>\n Speaking at the AllianceBernstein Strategic Decisions conference in New York this week, Moynihan said the behavior he\u2019s seeing<\/a> from clients reminds him of the mid-to-late-2010s. <\/p>\n He explained that the money moving through consumer\u2019s accounts is currently around $4 trillion a year, comprising of transactions such as cell payments, debit and credit cards cash out at ATMs and so on. For the year to date, growth in these transactions has been approximately 3.5%.<\/p>\n \u201cThat number doesn\u2019t mean a lot unless it has context,\u201d Moynihan added. \u201cIn May of \u201923 versus May of \u201922 it\u2019d probably have been like high single digits, maybe even double digits. So it slowed down coming through the summer of last year and sits at a level which is about where it would be in a low growth, low inflation environment economy\u2014where it was in \u201916, \u201917, \u201918.\u201d <\/p>\n The only problem with that theory is that in 2024 the U.S. doesn\u2019t have low inflation. Instead, it\u2019s sitting stubbornly at 3.4% in April<\/a>\u2014well above the Fed\u2019s 2% target.<\/p>\n This high inflation is why people may be spending less, as BofA\u2019s data has found, on general purchases, and are instead splurging on experiences.<\/p>\n \u201cThe way people are spending money is consistent with what you read about which is it\u2019s on experiences\u2014it\u2019s still driven at the margin by travel, entertainment and things like that,\u201d he continued.<\/p>\n Analysts need not look far for evidence of this phenomenon<\/a>\u2014just Google<\/a> Taylor Swift. The singer songwriter has smashed world records with her Eras Tour, which has grossed more than $1 billion<\/a>, and has become an economic phenomenon in the nations it has visited. <\/p>\n The tour generated $5 billion in consumer spending in the U.S.<\/a> in just six months, according to data from market insights experts\u00a0Nomura<\/a>, and is expected to add even more on its European leg. <\/p>\n The story isn\u2019t the same across the rest of the market, however. Moynihan said: \u201cOther things have moderated\u2014except for insurance payments\u2026 It has slowed down. We gotta keep the consumer in the game in the U.S. economy because it\u2019s such a big part of it.\u201d<\/p>\n Moynihan, who has lead BofA since 2010, has warned the Fed before<\/a> about pushing the consumer too hard and crippling a major driver of the economy. <\/p>\n Consumers are a little more \u201ctender\u201d he added, saying shoppers are now going to three supermarkets instead of two\u2014perhaps hunting for better prices between the competitors. <\/p>\n Moynihan, a Brown University alumni, said businesses are behaving in similar ways to consumers\u2014still managing to get by but without booming spends.<\/p>\n \u201cThey\u2019re basically saying: \u2018I\u2019m making money, I\u2019m fine, I\u2019m worried about every possibility you could layout: the wars, the China trade war, elections. But everything\u2019s OK but because it costs me more money to borrow I\u2019m being a little less aggressive\u2019,\u201d Moynihan laid out. <\/p>\n The pairing of consumers and businesses form a huge part of the American economy, Moynihan points out, and their message is the same: \u201cYou know what, I\u2019m being careful, slowing things down, still growing, still feel good about my overall business\u2026 but I\u2019m not hiring as much, I\u2019m not buying equipment as fast, I\u2019m not making a commitment to software purchases as fast.<\/p>\n \u201cOn the other hand it\u2019s not: \u2018I\u2019m laying off a lot of people\u2014I trying to manage this business carefully.\u201d<\/p>\n Signs of \u201cstress\u201d\u2014namely a wobble in credit risk ratings\u2014haven\u2019t been observed, Moynihan added, either on the consumer or commercial side.<\/p>\n<\/div>\n\nThe Swift case<\/h2>\n
Commercial concern<\/h2>\n
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