Bank of America Business’ Post

Transcript

Bank of America releasing its June consumer checkpoint, giving insight into the US consumer spending. Also financial well-being. Spending was actually up .7% year over year with younger generations being the driving force on this. Joining us right now to talk about it is the head of Bank of America Institute, Liz Everett Krisberg. So there's this question we keep asking: Is there a rebound in the consumer? It looks like your data is kind of showing that, too. -I'd say we're seeing the consumer spending growth continue to be positive, but it's growing at a softer level. It's stable. I think saying that the consumer spending growth is stable is the right way to think about it. Is that something that you would describe as a soft landing when you look at the economy? -I don't know that I'd say "soft landing," but I would say that when we look at the big picture, when we look at labor market growth, wage growth, we are continuing to see gains again across - you talked about generations - across all generations. But interestingly, we are seeing, again, like spending, we are seeing that rate of growth come down a little bit. So we're still seeing positive That's not a shock though, right? I mean, it's, I would be shocked if the spending was not coming down to some extent. We keep waiting for things to slow, but it's not falling off a cliff either. Not falling off a cliff. And it's not something that's necessarily going to indicate the Fed's going to have to cut rates soon. I'd agree with that. I think the other thing that we are seeing is when you look at the components of spending, we are seeing a convergence of services and goods. So services spending came down from about 3% to 1.5%. Goods spending rebounded back up, but it's still negative .2%. Now is it, this is kind of gross, but is it the pig and the python sort of analogy? We're working our way through the pig that was the pandemic that changed all of our consumer spending habits? Well, I think, I think you're making the right analogy going back to the pandemic. And what we're seeing there when we compare the results, right, is that during the pandemic we were in a totally different space. We're coming back to getting to pre-pandemic levels. And where was the economy pre-pandemic? It was actually in a pretty good place, right? Yeah. And so we keep looking for - and I think we are in tune to look for - signs that things are falling off a cliff, that things are ending. But when you look across the board at wage growth, which I talked about, continues to to go up. When you look at deposit balances, every generation still has deposit balances that are at least 44% higher. -That's what shocks me. I mean, I thought we were supposed to run through all this excess savings, excess cash that we had from the pandemic. That's not happening. And we're not. But part of that's because the wage growth, again, while moderating, is still higher than the spending growth, so you're able to not run through the money. Now there are some consumers on kind of the fringes that are starting to see some challenges, right? And in particular, we're seeing those potential challenges with younger consumers, even though they've got higher wage growth, even though they're they're driving spending. But when you look at credit utilization, right? Credit utilization is still below pre-pandemic levels, but it's starting to tick back up faster for the Gen Z and for the millennial consumers. And then the other thing, again, that we want to keep our eyes on is repayment rates. We looked at just those consumers with credit cards that are revolvers, right? So not people who are paying off their cards every month, but those people who are using it as a revolver. And it would make sense that those would be the ones who might be in financial stress sooner. Looking at their repayment rates, their repayment rates are going down. They are not defaulting, but it's going down. And that's going down to levels that were - are below where they were before the pandemic. When you talk about wages, though, still outstripping, wage gains outstripping spending gains. -Yeah. -That gets at this question of how sticky inflation is. How would you characterize it so I don't put words in your mouth? -Well, I think, I think the things to think about, you've got wage gains - again, they're coming down. They're pretty close. You are seeing, this is why I think we're seeing the deposits where they are, right? And this is where if people can, can continue to spend, they will. However, we're also seeing in our data some things as relates to behavioral changes, in particular with, again, younger consumers, where we're starting to see their spending for groceries, for example, shifting from premium and kind of standard grocery stores to buying more. at the value chains. -Wow, you're tracking exactly what people are buying on top of it? -Well, we're not tracking if they are buying, you know, broccoli or steak, but we are tracking where they are spending that money. So if you look at the proportion of grocery spend at, you know, a high-end grocer versus a very value one. We're seeing more, particularly with younger consumers, a shift to people spending more of their grocery dollars at these value chains. -Can that be because of Walmart's performing better and putting better stuff in there than there used to be? -It certainly could be that, but it also could be that people are thinking, alright, this is emotionally - I'm reading the headlines too. I'm worried about the economy. I'm going to change my behavior. The other behavior that we're seeing - Is their spend on grocery going down? Is the total dollar amount they're spending on grocery going down or just shifting? I gotta double check on that. But the other thing that we're looking at is people are starting, if you look at the total spend on food, including food away from home and groceries, the shift is to more groceries. So people are also making a behavioral change to eat out less, to eat at home more. So it's a more cautious action. by the consumer, again predominantly younger consumers that we are seeing right now. I think that that they seem fine, but it's something we want to keep our eyes on. Liz, remind me one more time how many accounts you're looking at just because I think this is one of the more valuable data sets we watch. It's real data. -Yeah. So we look at 69 million consumer and small business accounts and we are not taking surveys. We are actually asking them what - not asking - we're just looking at what they're doing. Yeah. Liz, thank you. We always appreciate the updates. And I think if you see a big change, it's going to be something that we sit up and pay notice to as well. And now we're throwing confetti behind you. -Now they are throwing confetti. Now we're throwing confetti. -Say hi to your father for me. I will. Of course. -Thank you.