New American Consumer Spending Data Released

Leaders of the biggest financial institutions in America are calling out a resilient consumer and economy in their second quarter earnings reports, adding fuel to growing sentiment that a recession may come later than economists had expected, if at all.

“The consumer's in good shape,” JPMorgan Chase (JPM) CEO Jamie Dimon said during the bank's earnings call on July 14. “They're spending down their excess cash.”

Bank of America (BAC) CEO Brian Moynihan said in the company's earnings release that “we continue to see a healthy US economy that is growing at a slower pace, with a resilient job market.”

Broadly, recent economic data has supported what banks are seeing. On Tuesday, the June retail sales report came in weaker than economists had projected but still showed overall growth of 0.2%. Jefferies US economist Thomas Simons noted the results were “fairly encouraging overall.” Other recent reports have shown cooling inflation amid a still-growing labor market. 

All of those factors have been at play for the American consumer, who swipes credit and debit cards from the likes of JPMorgan, Bank of America, Citi (C), and others.

“The big financials have a good lens into what the consumer is doing and not only if the consumer is spending but if the consumer is still borrowing,” Liz Young, SoFi's head of investment strategy told Yahoo Finance Live. “So what I heard generally speaking from them is that, absolutely, there's still an appetite to spend. However, there are consumers doing it on leverage, or credit. And so far, that is perfectly fine because everybody is still employed in a strong labor market and there's been wage growth.”

At Bank of America, that credit card data still remains positive. Consumer payment spending at Bank of America has totaled $2.1 trillion through the first six months of the year, the company said in its earnings release on Tuesday. That's a 5% increase from the spend during the same time period in 2022.

“The consumer is still in a pretty healthy place,” Bank of America CFO Alastair Borthwick said on the company's earnings call on Tuesday. “You can see that in the unemployment statistics and you can see it in the way that they're just continuing to spend a little bit more money year over year. So I feel like we've been pretty consistent. The consumer's pretty resilient. That remains the case. And we're benefiting it from it right now in the card experience.”

When asked about overall feelings on the “state of the consumer” and consumers needing to use revolving credit, JPMorgan CFO Jeremy Barnum said it's not because account balances are dwindling.

People use ATMs at a Chase Bank branch in Manhattan, New York City, U.S., May 20, 2022. REUTERS/Andrew Kelly
People use ATMs at a Chase Bank branch in Manhattan, New York City, U.S., May 20, 2022. REUTERS/Andrew Kelly

“We still see this as a normalization, not deterioration story when we talk about consumer credit,” Barnum said. “Actually, revolve per account has still not gotten to pre-pandemic levels actually. So I would definitely say that it's a wanting rather than needing, at least for our portfolio at this point. And yes, I think the consumer continues to surprise on the upside here.”

But some economists and experts still expect tighter lending conditions, including higher interest rates, to eventually weigh on the consumer. Notably, banks are still adding to their loan provisions, an expense set aside in case of uncollected loan payments.

“I think the consumer is in a vulnerable position and loan losses will increase substantially…over the next few quarters,” Odeon Capital Group financial strategist Dick Bove told Yahoo Finance Live

That hasn't fully played out yet, though.

“Overall I'd say we're seeing a more cautious consumer not necessarily a recessionary one,” Citigroup CEO Jane Fraser said during the company's earnings call on July 14.

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