U.S. consumers and businesses alike have turned cautious about spending this year because of elevated inflation and interest rates, according to Bank of America CEO Brian Moynihan.<\/p>\n
Whether it\u2019s households or small- to medium-sized businesses, Bank of America clients are slowing down the rate of purchases made for everything from hard goods to software, Moynihan said Thursday at a financial conference held in New York.<\/p>\n
Consumer spending via card payments, checks and ATM withdrawals has grown about 3.5% this year to roughly $4 trillion, Moynihan said. That\u2019s a sharp slowdown from the nearly 10% growth rate seen in May 2023, he said.<\/p>\n
\u201cBoth of our customer bases that have a lot to do with how the American economy runs are saying, \u2018You know what? I\u2019m being careful, slowing things down,\u2019\u201d Moynihan said, referring to consumers and businesses.<\/p>\n
The slowdown began last summer and is consistent with the \u201cvery low growth\u201d environment of the period from 2016 through 2018, he said.<\/p>\n
Nearly a year after the last Federal Reserve rate increase, consumers and businesses are wrestling with inflation and borrowing costs that remain higher than they are accustomed to. The Fed began efforts to tame inflation by hiking its benchmark rate starting in March 2022, hoping it could slow the economy without tipping it into recession.<\/p>\n
Many economists believe the Fed is on track to pull off that feat, which has helped the stock market reach new highs this year. But consumers are still grappling with higher prices for goods and services, and that has impacted U.S. companies from McDonald\u2019s to discount retailers as Americans adjust their behavior.<\/p>\n
Food shoppers are hitting up more store locations in search of deals, according to Moynihan. \u201cThey\u2019re going to three grocery stores instead of two, is one of the stats we see,\u201d he said.<\/p>\n
The now-tepid growth in overall spending is being propped up by travel and entertainment, while \u201cother things have moderated, except for insurance payments,\u201d Moynihan said. Growth in rent payments has slowed, he noted.<\/p>\n
\u201cWe\u2019ve got to keep the consumer in the game in the U.S. economy, because [they\u2019re] such a big part of it,\u201d Moynihan said. \u201cThey\u2019re getting a little more tenuous, and that is due to everything going on around them.\u201d<\/p>\n
The same is true for small- and medium-sized businesses, the Bank of America CEO said. His company is the second-largest U.S. bank by assets, after JPMorgan Chase. Moynihan and other bank CEOs have a bird\u2019s-eye view of the economy, given their coast-to-coast coverage of households and companies.<\/p>\n
Business owners are saying, \u201d\u2018I still feel good about my overall business, but I\u2019m not hiring as much. I\u2019m not buying equipment as fast. I\u2019m not making software purchases as fast,\u2019\u201d Moynihan said.<\/p>\n
The bank\u2019s economists believe that inflation will take until the end of next year to get under control and that the Fed will begin cutting interest rates later this year, Moynihan said. The U.S. economy will probably grow at around a 2% level, avoiding recession, he added.<\/p>\n<\/p>\n
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