The Zhitong Finance App learned that Brian Moynihan (Brian Moynihan), CEO of Bank of America (Bank of America), a major Wall Street bank, recently said that due to sticky US inflation and continued high interest rates, American consumers and businesses have become more cautious about consumer spending this year. Moynihan said at a financial conference in New York on Thursday that these key Bank of America customers, whether households or small to medium businesses, are slowing down their purchases of everything from hard goods to software.

Moynihan quoted statistics as saying that Bank of America data showed that US consumer spending on credit card payments, checks, and ATM withdrawals increased by about 3.5% this year, reaching about 4 trillion US dollars. However, he stressed that this is a sharp slowing statistic compared to a growth rate of close to 10% in the same period in May 2023.

“Both of our customer groups have a lot to do with how the US economy works.” Moynihan said in an interview with the media. He was referring to American consumers and businesses. “You know, I'm being careful about this; they've all slowed down.”

Moynihan said that this slowdown in consumption began last summer and is generally consistent with the “very low growth” environment between 2016 and 2018.

Nearly a year after the Federal Reserve last raised interest rates, American consumers and businesses are still battling sticky inflation and high borrowing costs, which are still higher than what they have been accustomed to for years. The Federal Reserve began raising the benchmark interest rate in March 2022 and began making every effort to curb inflation. It is hoped that the aggressive interest rate hike cycle will slow economic growth without causing the US economy to fall into recession, that is, achieve the Fed's vision of a “soft landing” for the US economy.

Currently, many economists believe that the Federal Reserve is expected to achieve this “soft landing” feat, which has helped the US stock market continue to reach record highs this year. However, consumers are still struggling to cope with rising prices for goods and services. As Americans adjust their consumption behavior, American companies, from McDonald's (McDonald's) to discount retailers, have been affected to varying degrees.

After the Federal Reserve began a cycle of aggressive interest rate hikes since 2022 to curb the hot inflation rate, the US economy fully withstood the terrible warning of a recession during the period from 2022 to 2023. The main supporting factors behind it were the tight labor market and the overall wage level remained high. Together, these two major factors boosted US consumer spending, and this “giant wheel” of consumption can be called the “core driving force” of the US economy. Statistics on all consumer items account for 70% to 80% of the US GDP data.

According to Moynihan, food consumers are looking for deals in more stores. “They're probably going to three grocery stores instead of two, which is one of the statistics we've seen,” he said.

Moynihan said that the current moderate increase in overall spending is supported by tourism and entertainment projects, while “with the exception of insurance spending, there has been a slowdown in everything else.” He pointed out that the growth in rent payments has slowed across the board.

“We must keep consumers involved in the growth of the US economy because they are the most important part of the US economy,” Moynihan stressed. “But they're getting more vulnerable, and that's because of everything that's going on around them.”

The Bank of America CEO said the same is true for small and medium businesses. In terms of asset size, Bank of America is the second-largest commercial bank in the US, after commercial banking giant J.P. Morgan.

Moynihan and the CEOs of other major banks have a bird's-eye view and data on the US economy because they have a very wide range of coverage, covering households and businesses throughout the US.

“Business owners told us: I'm still feeling good about my overall business, but I haven't hired that many employees recently. I'm not that quick to buy gear. I'm not buying software that fast.” Moynihan emphasized.

Bank of America economists believe that the US inflation rate will not be controlled until the end of next year to move closer to the 2% target. It is expected that the Federal Reserve will start cutting interest rates later this year, but it is expected that the Fed will cut interest rates only once this year. Moynihan also said that the US economy may slow down the pace of growth by about 2% to avoid falling into a substantial recession.

The revised economic data released on Thursday showed that the US economic growth slowed significantly from the end of last year, and consumer commodity spending was weak: the revised US GDP growth rate in the first quarter was 1.3%, lower than the initial 1.6% growth rate. After the 3.4% growth rate in the fourth quarter of last year, the main economic growth engine, personal consumption expenditure in the first quarter was revised, and the quarterly growth rate of 2.0% exceeded expectations.