Brian Thomas Moynihan, Chairman and Chief Executive Officer of Bank of America, during the U.S. Senate Committee on Banking, Housing and Urban Affairs Oversight Hearing on Wall Street Firms on Capitol Hill in Washington, U.S., December 6, 2023 Give a speech on.
Evelyn Hochstein | Reuters
U.S. consumers and businesses have become cautious about spending this year as inflation and interest rates rise Bank of America CEO Brian Moynihan.
Moynihan told a financial conference in New York on Thursday that Bank of America customers, whether they are households or small and medium-sized businesses, are slowing purchases of everything from durable goods to software.
Moynihan said consumer spending through card payments, checks and ATM withdrawals has grown about 3.5% this year, to about $4 trillion. This is a sharp slowdown from growth of nearly 10% in May 2023, he said.
“Both of our customer segments that are closely tied to the workings of the U.S. economy are saying, ‘You know what? I’m being cautious and slowing down,'” Moynihan said, referring to consumers and businesses.
He said the slowdown began last summer and was consistent with the “very low growth” environment between 2016 and 2018.
Nearly a year after the Federal Reserve last raised interest rates, consumers and businesses are grappling with inflation and borrowing costs that remain higher than they are accustomed to. The Federal Reserve will work to curb inflation by raising benchmark interest rates starting in March 2022, hoping to slow economic growth without tipping it into recession.
Many economists believe the Fed is on track to achieve this feat, which could help stocks reach new highs this year. But consumers are still grappling with rising prices for goods and services, which is having an impact on U.S. businesses McDonald’s Offer discounts to retailers as Americans adjust their behavior.
Moynihan said food shoppers are looking for deals in more stores. “One of the statistics we see is they’re going to three grocery stores instead of two,” he said.
Moynihan said the current modest growth in overall spending is supported by travel and entertainment, while “with the exception of insurance payments, growth has slowed.” He noted that rental growth has slowed.
“We have to keep consumers in the game with the U.S. economy because they are an important part of the U.S. economy,” Moynihan said. “They are becoming a little bit more vulnerable because of everything that’s going on around them.”
The Bank of America CEO said the same is true for small and medium-sized businesses. His company is the second-largest bank in the United States by assets, behind JPMorgan. Moynihan and other bank CEOs have a bird’s-eye view of the economy because they cover households and companies from coast to coast.
Business owners say, “I still feel good about my business overall, but I’m not hiring as fast. I’m not buying equipment as fast. I’m not buying software as fast,” Moynihan said.
Moynihan said the bank’s economists believe inflation will not be brought under control until the end of next year, and the Federal Reserve will begin cutting interest rates later this year. He added that the U.S. economy could grow at about 2% and avoid a recession.
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