The U.S. economic system is predicted to proceed tightening over the following 12 months, however a recession is prone to be averted due to resilient client spending, Financial institution of America CEO Brian Moynihan mentioned Wednesday.
At a lunch occasion hosted by the Financial Membership of New York, Moynihan supplied blended commentary on the U.S. client outlook, which has lengthy been a lynchpin of the economic system.
He mentioned that client spending is up 4.8% to date this 12 months, however he famous that the tempo of development is weakening. Shopper spending in September is up 4.5% from the identical interval final 12 months, Moynihan mentioned.
“What you are seeing is a slowdown,” he mentioned, referring to rising pessimism because the starting of the 12 months. “Shoppers are anxious about what’s taking place subsequent.”
Moynihan’s projection of a so-called gentle touchdown, reasonably than a recession, echoed the newest prediction by the American Bankers Affiliation’s Financial Advisory Committee.
Earlier this month, the committee forecast that the U.S. economic system will develop at a charge of lower than 1% by means of the top of the second quarter of 2024. The economists on the committee famous that strong client spending has helped increase the U.S. economic system throughout what has in any other case been a unstable 12 months.
Moynihan mentioned that BofA’s strategists are projecting the U.S. economic system “slows down, troughs and begins coming again up” by the top of subsequent 12 months.
Although many shoppers proceed to keep up secure money balances, and client deposit accounts are “nonetheless up considerably,” tighter client spending is impacting the prospects of companies, he mentioned.
And “lower-median” earnings shoppers at BofA are beginning to present unfavorable money flows, in line with Moynihan.
He famous the influence that top inflation has had on shoppers, as the costs of meals and gasoline have risen. He additionally pointed to the results of the Federal Reserve’s interest-rate hikes, which have resulted in larger borrowing prices.
The shoppers exhibiting essentially the most indicators of stress are sometimes youthful account holders, Moynihan mentioned. On the identical time, as rates of interest have risen, higher-end transactional deposits have migrated to funding accounts, he mentioned.
In July, BofA reported that its common deposit balances totaled $1.9 trillion within the second quarter, which was down 7% from the identical interval final 12 months.
Moynihan additionally mentioned Wednesday that the actual property sector faces mounting indicators of stress, together with housing shortages which have pushed up rental costs in lots of U.S. cities, in addition to workplace buildings which have struggled to fill vacancies following adjustments in office tradition through the COVID-19 pandemic.
Nevertheless, multi-family residential housing “continues to be very sturdy,” Moynihan mentioned.