Shoppers carry bags in San Francisco, California on Thursday, September 29, 2022.
David Paul Morris | Bloomberg | Getty Images
According to credit card giants, US consumers have shown their willingness to continue paying higher prices in the face of a sluggish economy that could plunge into recession American Express and Bank of America.
American Express on Friday reported better-than-expected earnings and revenue for the third quarter while raising its full-year guidance. The company said total customer spending rose 21% year over year, driven by growth in goods and services and travel and entertainment.
Demand for travel is particularly robust as Americans catch up on trips that have been postponed due to the pandemic. Consumers are also investing heavily in groceries and entertainment now that the pandemic lockdown has eased.
American Express said spending in its travel and entertainment segment was up 57% year over year, with volumes in its international markets exceeding pre-pandemic levels for the first time in the third quarter.
“Cardmember spending remained near record levels during the quarter,” American Express CEO Stephen Squeri said on a conference call on Friday. “We expected the recovery in travel spending to be a tailwind for us, but the strength of the recovery has exceeded our expectations throughout the year.”
Bank of America isn’t seeing slower spending growth either, despite inflation hitting all-time highs. CEO Brian Moynihan said earlier this week that the bank’s customers continued to spend freely, using their credit cards and other payment methods for 10% more transaction volume in September and the first half of October than a year earlier.
“Analysts might wonder if talk of inflation, recession and other factors could [result] in slower spending growth,” Moynihan said Monday during a conference call. “We just don’t see [that] here at Bank of America.”
However, recent economic data have shown signs of stagnation in consumer spending. Retail and food service sales were little changed for September after rising 0.4% in August, according to the Commerce Department’s flash estimate.
Consumers may have started to become more cautious about spending as prices have risen sharply and the Federal Reserve has hiked interest rates to slow the economy.
— CNBC’s Hugh Son and Jeff Cox contributed coverage.