Bank of America CEO Brian Moynihan says consumer and commercial business are slowing

Consumers may be squeezed by inflation, but it seems their wallets aren’t tight enough to keep them from spending and having a good time. At least, that’s what Brian Moynihan sees in the Bank of America data.

But while shoppers continue to splurge on experiential spending, they are consciously cutting out more day-to-day purchases, like groceries. And the story is the same on the commercial side, the CEO said, where spending is still there but purchases are slowing.

Speaking at the AllianceBernstein Strategic Decisions conference in New York this week, Moynihan said the behavior he’s seeing from customers reminds him of the mid-to-late 2010s.

He explained that the money moving through consumer accounts currently amounts to around $4 trillion a year, and includes transactions such as mobile payments, cash withdrawals with debit and credit cards at ATMs, etc. So far this year, the growth in these transactions has been approximately 3.5%.

“That number doesn’t mean much unless you have context,” Moynihan added. “In May of ’23 versus May of ’22 it probably would have been high single digits, maybe even double digits. “So it slowed down over the summer of last year and is at a level that is roughly what it would be in an economy with a low-growth, low-inflation environment, where it was in 2016, 2017 and 2018.”

The only problem with that theory is that in 2024 the United States will not have low inflation. Instead, it remains stubbornly at 3.4% in April, well above the Federal Reserve’s 2% target.

This high inflation is why people may be spending less, as BofA data has found, on general purchases and instead splurging on experiences.

“The way people spend money is consistent with what you read, which is on experiences; it’s still marginally driven by travel, entertainment and things like that,” he continued.

The Swift case

Analysts don’t need to look far for evidence of this phenomenon: just Google Taylor Swift. The singer-songwriter has broken world records with her Eras Tour, which has raised more than a billion dollars, and has become an economic phenomenon in the countries she has visited.

The tour generated $5 billion in consumer spending in the United States in just six months, according to data from market analysis experts Nomura, and is expected to add even more on its European leg.

However, the story is not the same in the rest of the market. Moynihan said: “Other things have moderated, except insurance payments… It has slowed down. “We have to keep the consumer in the game of the American economy because they are a very important part of it.”

Moynihan, who has led BofA since 2010, has already warned the Federal Reserve about putting too much pressure on the consumer and crippling an important driver of the economy.

Consumers are a little more “gentle,” he added, saying shoppers are now going to three supermarkets instead of two, perhaps looking for better prices among competitors.

commercial concern

Moynihan, a Brown University alumnus, said businesses are behaving similarly to consumers: still managing to get by but without booming spending.

“They’re basically saying, ‘I’m making money, I’m fine, I’m worried about every possibility you can think of: wars, the trade war with China, the election. But it’s all good, but since borrowing is costing me more money, I’m being a little less aggressive,” Moynihan explained.

The mix of consumers and businesses makes up a big part of the American economy, Moynihan says, and their message is the same: “You know what? I’m being careful, I’m slowing things down, I’m still growing, I’m still feeling good about my overall situation.” business… but I’m not hiring as much, I’m not buying equipment as quickly, I’m not committing to purchasing software as quickly.

“On the other hand, it’s not, ‘I’m laying off a lot of people; I’m trying to run this business carefully.'”

Moynihan added that there have been no signs of “stress” – that is, a swing in credit ratings – on either the business or consumer side.

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