Shoppers carry bags in San Francisco, Calif. on Thursday, Sept. 29, 2022.
David Paul Morris | Bloomberg | Getty Images
U.S. consumers have demonstrated their willingness to keep paying higher prices in the face of a sluggish economy that could tip into a recession, credit card giants say American Express and Bank of America.
On Friday, American Express reported stronger-than-expected third-quarter earnings and revenue, while raising its full-year forecast. The company said overall customer spending jumped 21% year-over-year, driven by growth in goods and services as well as travel and entertainment.
Travel demand is particularly resilient as Americans make up for postponed travel due to the pandemic. Consumers are also splurging on food and entertainment after the easing of pandemic shutdowns.
American Express said its travel and entertainment segment saw spending rise 57% from a year ago, with volumes in its international markets surpassing pre-pandemic levels for the first time in the third quarter. .
“Cardholder spending remained at near-record highs during the quarter,” American Express CEO Stephen Squeri said Friday in an earnings call. “We expected the recovery in travel spending to be a tailwind for us, but the strength of the rebound exceeded our expectations throughout the year.”
Bank of America is also not seeing a slowdown in spending growth, although inflation is at historic 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% higher transaction volume in September and the first fortnight. October compared to the previous year.
“Analysts might wonder if discussions of inflation, recession and other factors could [result] in slower spending growth,” Moynihan said on a conference call Monday. “We just don’t see [that] here at Bank of America.”
Recent economic data, however, showed signs of stagnation in consumer spending. Retail and foodservice sales were little changed in September after rising 0.4% in August, according to the Commerce Department’s advance estimate.
Consumers may have become wary of the splurges as prices rose sharply and the Federal Reserve raised interest rates to slow the economy.
— CNBC’s Hugh Son and Jeff Cox contributed reporting.