US consumer spending remains resilient despite inflation: BofA

Bank of America (BofA) said customer spending continues to show signs of resilience despite surging inflation, with pent-up demand for travel and leisure countering rising petrol prices and other increased costs.

Spending on credit and debit cards was up 11 per cent from a year earlier in June, compared with a 13 per cent increase in April and 9 per cent gain in May, the bank said on Thursday (Jul 7). The higher spending comes amid rising prices and fears that the US is poised to slide into recession. 

“Consumers are in better shape to respond to a slowdown in the US economy than they have been in many previous business cycles,” David Tinsley, senior economist at the Bank of America Institute, said in a statement. “But with some slowdown in services spending, we may need to wait until the summer is over to get a clearer picture of the strength of the underlying consumer momentum.”

Financial giants have been reporting signs of consumer strength even amid soaring inflation, which accelerated to a new 40-year high in May, and rising interest rates. The largest US banks saw spending on credit cards surge in the first 3 months of the year as customers began travelling and dining out again following Covid-19 lockdowns.

While overall spending has remained strong among Bank of America customers, growth has slowed on a per-household basis, climbing 3.3 per cent in the 28 days till Jun 30 from the year-earlier period. Some of the slowdown may be the result of a pullback from previous pent-up demand for vacations, the Charlotte, North Carolina-based company said.

For lower-income households, Bank of America saw total card spending excluding petrol and groceries contract 1 per cent. Among higher-income households, such spending “remained positive but is on a downward trend”, the company said. Bloomberg

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