BofA’s Moynihan Says Consumers Still Strong Even With High Rates

BofA’s Moynihan Says Consumers Still Strong Even With High RatesIn a recent interview with CNBC, Brian Moynihan, the CEO of Bank of America, shared his optimistic outlook on the consumer sector. Contrary to some predictions of a slowdown, Moynihan reported that the 60 million American consumers Bank of America serves have demonstrated resilience, with outgoings totaling $4.5 trillion, a 9% increase from 2021 to 2022 [1]. This trend was further evidenced by the fact that every major consumer spending window, including Thanksgiving, Black Friday, Cyber Monday, and Christmas, has exceeded previous records, albeit by more modest margins [1].Moynihan's observations contradict the notion that consumers are running on empty, as fears of a post-pandemic savings drain had led some experts to question the sustainability of consumer spending [1]. However, recent data revisions by the Bureau of Economic Analysis indicate that American families have saved more than initially reported, particularly from pre-pandemic income sources such as mutual funds and real estate investment trusts [1]. This unexpected increase in savings stockpiles, coupled with the fact that real average earnings are still increasing at a rate outpacing inflation [1], suggests that consumers remain in a position to spend.It is worth noting that while consumers in general appear to be in good financial shape, there are differences in spending behavior across income brackets. For instance, those with discretionary funds have been more likely to move their money out of the consumer banking system and into the market [1]. On the other hand, those with smaller balances have experienced only minimal decreases [1].Despite these variations, Moynihan's analysis paints a promising picture of consumer resilience in the face of high interest rates. While it is essential to remain vigilant to changing economic conditions, the data suggests that consumers continue to play a significant role in driving the economic recovery.References:[1] Fortune. (2023, December 6). Brian Moynihan: Consumers have cash left, despite warnings of a slowdown. https://fortune.com/2023/12/06/bank-of-america-ceo-brian-moynihan-consumers-have-cash-left/?ref=biztoc.com