US consumer spending continues despite rising prices, a threat of recession | So Good News
Shoppers carry bags in San Francisco, California, Thursday, Sept. 29, 2022.
David Paul Morris Bloomberg | Getty Images
US consumers have shown a willingness to continue paying higher rates amid an economic recovery that could put them in trouble, according to the credit card giants. American Express and Bank of America.
American Express on Friday reported stronger-than-expected earnings for the third quarter, raising its full-year forecast. The company said total customer spending rose 21% year over year, driven by growth in goods and services and travel and entertainment.
The demand for travel is mainly due to the fact that Americans are making trips that are canceled due to the pandemic. Consumers are also increasingly turning to food and entertainment after the pandemic has been shut down.
American Express said its travel and leisure division saw a 57% increase in revenue from a year ago with the number of its international markets surpassing pre-pandemic levels for the first time in the third quarter.
“Cardmember spending was the slowest in the sector,” American Express CEO Stephen Squeri said Friday on an earnings call. “We expected that the recovery in transportation costs would be more difficult for us, but the strength of the recovery has exceeded our expectations for the rest of the year.”
Bank of America is no longer seeing a slow growth in spending, even though inflation has reached record highs. CEO Brian Moynihan said earlier this week that the bank’s customers continue to use it freely, using their credit cards and other payment methods 10% more in September and the first half of October than last year.
“Researchers may wonder if the issue of inflation, recession and other factors is possible [result] on the slow growth of income,” Moynihan said Monday at the conference. “We don’t see it [that] here at Bank of America.”
Recent economic data, however, has shown signs of stagnation in consumer spending. Retail and food sales were little changed in September after rising 0.4% in August, according to preliminary estimates from the Commerce Department.
Consumers may be wary of inflation as prices soared and the Federal Reserve raised interest rates to slow the economy.
– CNBC’s Hugh Son and Jeff Cox contributed reporting.