by Elizabeth Dilts Marshall
NEW YORK, March 29 (Reuters) – Analysts and investors at major Wall Street banks are eagerly awaiting the release of first-quarter corporate results next month for early indications of the outlook for household consumer spending in an inflationary environment.
Consumer spending in the United States has been rising for months thanks to the economy’s rebound from the COVID-19 pandemic.
There are, however, signs that the decline in massive government budget support and the sharp acceleration in inflation, exacerbated by the Russian military’s invasion of Ukraine, are beginning to weigh on the finances of low-income Americans.
The leaders of JP Morgan Chase & Co, Bank of America and Wells Fargo have assured for several months that American consumption is doing well, with households spending more and repaying their debts.
Bank of America, the second-largest U.S. bank by assets, said its customers spent $63 billion in February via debit and credit cards, a 21% year-on-year increase, with travel spending up , restaurants, public transport and gym memberships.
“We saw a strong continuation of payment and spending dynamics in February,” said Mary Hines Droesch, head of consumer products and services at Bank of America.
Year-on-year retail sales rose 17.6% in February, according to Commerce Department data released two weeks ago.
“Despite record inflation and consumer sentiment at an eleven-year low, consumption, particularly retail sales, has shown strength,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.
According to her, consumer behavior has been favored by a tight labor market and excess savings in particular.
LOW REAL INCOME GROWTH
But as the population resumes its consumption habits, confidence in the prospects for significant income growth over the next two years is at an eight-year low, according to data from the University of Michigan, and the economists say real incomes of Americans are collapsing.
Jason Briggs, an analyst at Goldman Sachs, expects real household income to increase by just 0.5% this year and believes that the income of the lowest earners will fall due to inflation and the end of federal aid. .
“The biggest impediment to real spending growth in 2022 is very weak real income growth,” he wrote in a note.
According to a report by Manheim Consulting, late payments on auto loans increased in February for the ninth consecutive month, due to subprime borrowers.
The New York Federal Reserve identified another possible cause of future difficulties last week: 37 million Americans will have to resume repayment of federal student loans from May, after two years of suspension linked to the pandemic.
“The difficulties encountered by borrowers in managing their (private) student loans (..) suggest that borrowers will face an increase in delinquencies once the moratorium ends,” say the New Fed researchers. York. (Report Elizabeth Dilts Marshall, French version Laetitia Volga, edited by Jean-Stéphane Brosse)