Bank of America (BAC) CEO Brian Moynihan isn't joining the chorus of those warning about the economy heading into 2023, and that's because the consumer continues to shop, shop, shop despite ongoing inflationary pressures.
"The American consumer is resilient," Moynihan said on Yahoo Finance Live (video above).
According to the chief executive, consumer spending — as measured by transactions on BofA's debit and credit cards — is up 10% through October even as inflation remains high and the economy slows.
"It's still very strong at a relative basis," Moynihan said, adding that "people are slowing down a bit [on spending] but not slowing down consistent with a real slowdown in the economy yet, and that's the good news.'
Consumer spending accounts for more than two-thirds of U.S. economy activity and increased by 0.4% in the month of August.
Travel and entertainment are among the top categories for consumer spending among BofA consumers "because coming from last year, when you had the Delta COVID variant to this year, people are traveling," Moynihan said, especially with vaccinations widely available and cases down significantly from 2020-21 levels.
It's because of these stats that Moynihan and BofA analysts are predicting only a mild recession.
“What we're not seeing is it come to fore yet and that keeps moving out because of the resiliency in the consumer," he said.
'Consumers are spending'
According to Moynihan, there are four dimensions when it comes to the resiliency of the consumer: Low unemployment, money in people's bank accounts, the number of those employed, and the capacity to borrow.
The money in the accounts of BofA's 35 million core households is the same as where it was in August and "multiples" over where it was during the height of the pandemic, especially for those in the $100,000 or under income bracket, he said.
Additionally, Moynihan said, BofA's credit card borrowings are still 12% below pre-pandemic levels, while home equity line draws are down 25-30%. And while mortgage finance has slowed down, those with home equity lines in place "have capacity to borrow, the house values are still strong, so all that bodes well," he said.
Personal consumption expenditures have been trending upward since February 2021, with $17.47 billion spent in August 2022.
"The real facts are today consumers are spending," Moynihan said. "Commercial credit is in great shape, even though things like housing and stuff like that have flattened out because that's the way the Fed slows down the economy. The reality is the consumers still are employed and earning money, and so the Fed's toughest job on inflation is also the best thing about the U.S. economy, which is a strong consumer."
Moynihan's comments echoed what some heads of large consumer-facing corporations have also relayed upon announcing stronger-than-expected earnings. P&G CEO Jon Moeller also told Yahoo Finance on Wednesday that he sees a "resilient" consumer and suggested that may help stave off a bad recession.
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Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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