Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: It really does all come down to the consumer and
Speaker 2: what the appetite there is.
Speaker 1: We want to really focus on the US consumer.
Speaker 2: Bank of America releasing its final Consumer Checkpoint report of
Speaker 2: the year saying there were no signs of consumer resilience waiting.
Speaker 2: In November, President of Retail Banking Holly O'Neal writing, spending
Speaker 2: momentum carried across all income cohorts through the gap between higher,
Speaker 2: middle and lower income household spending growth is narrowing.
Speaker 1: Holly joins us Now, Holly, wonderful to see. Thank you
Speaker 1: for big with us morning, Good morning.
Speaker 2: How much power is there left in bank accounts, in
Speaker 2: desire in some of the spending trends that you're seeing
Speaker 2: right now.
Speaker 3: Well, as you said, the consumer resilience is not waning.
Speaker 3: So across all of the metrics that we look at,
Speaker 3: they look really healthy and the dry powder is there.
Speaker 3: So when you look at the money they have and
Speaker 3: they're checking and savings accounts still significantly higher than it
Speaker 3: was even pre pandemic. Now we've seen that come down,
Speaker 3: but it's still higher, so they still have some cushion
Speaker 3: in there across all income cohorts, high, middle, low, and
Speaker 3: in particular the low income cohorts look even stronger when
Speaker 3: you look at it on a percentage basis. So from
Speaker 3: a liquidity perspective, they look strong. From a borrowing perspective,
Speaker 3: they also look strong. So they're borrowing in and around
Speaker 3: the same levels that they were pre pandemic when you
Speaker 3: look at our credit card data, so that looks good.
Speaker 3: They still have borrowing capacity. The credit environment from a
Speaker 3: bank perspective is fairly normalized. So I think the resilience
Speaker 3: of the consumer looks strong. And they're spending also looks good.
Speaker 3: And we're obviously in the peak spending period of the year,
Speaker 3: so their spending looks good. They're spending was up in November,
Speaker 3: and that matches our data of our surveys that we
Speaker 3: take pre holiday. What are you expecting to spend during
Speaker 3: the holidays?
Speaker 2: So the reason why I find this so interesting, first
Speaker 2: of all, is because this has been what has driven
Speaker 2: us exceptionalism is the envy of a lot of other countries,
Speaker 2: but also runs counter to what we're hearing from the
Speaker 2: guidance of certain retail companies.
Speaker 1: In particular, how do you swear that well?
Speaker 3: I think I think that the consumer. You do have
Speaker 3: difference in sentiment versus actual behavior. So we look at
Speaker 3: the actual behavior of the consumer. What are they spending,
Speaker 3: what are they spending on? So, as I said, spending
Speaker 3: is up holiday period, it's also up. They're expecting to
Speaker 3: spend twenty one dollars this holiday period. That's up seven percent.
Speaker 3: So you know, within that, we're seeing trades to more
Speaker 3: discount stores. So they're looking to stretch their dollar a
Speaker 3: little bit more, and they're seeing the benefit of some
Speaker 3: lowering prices. So in gas as an example, So in gas,
Speaker 3: we're saying a higher number of transactions, but the dollar
Speaker 3: amount is lower because the prices have come down. So
Speaker 3: they're making trades within their spending behavior and they're really
Speaker 3: making their dollar go further.
Speaker 4: How do you distinguish the sort of trading down whole scenario.
Speaker 4: How do you say that's stretching the dollar versus this
Speaker 4: is weakness and this is something that might show some cracks.
Speaker 3: I think, in my opinion, it's the consumer making good
Speaker 3: choices with the money they have to spend. They're very
Speaker 3: informed because the overall spending number is higher year over year,
Speaker 3: but then within that they're making trades and adjustments. At
Speaker 3: the same time, their liquidity levels are still strong and
Speaker 3: they still have borrowing capacity, So all of those things
Speaker 3: working together, I think are showing a good, strong, resilient.
Speaker 4: Consumer trend has also been this spend on services. Airlines
Speaker 4: spending still robust, cruises still robust. Do you see that
Speaker 4: continuing on or could we have any sort of rotate
Speaker 4: back into good spending.
Speaker 3: I think you could see that rotation. As you all know,
Speaker 3: during the pandemic, people really up the ante on the
Speaker 3: durable goods, the washers, the dryers. We still haven't seen
Speaker 3: that come back because those have a long shelf life,
Speaker 3: So I think as you see that mature, you could
Speaker 3: see it shift back. But the spending patterns really remain
Speaker 3: fairly consistent. Travel experiences, services, those are very strong. We
Speaker 3: are seeing in this holiday spend we are seeing electronics
Speaker 3: come back a little bit, so that's also, you know,
Speaker 3: a beginning trend.
Speaker 5: I would say, speaking of the holiday season, a lot
Speaker 5: of retail analysts have come on and said they're really
Speaker 5: folks in the fact that there's five less shopping days
Speaker 5: because it's a shrunk basically holiday season between Thanksgiving and Christmas.
Speaker 1: Do you see that having any.
Speaker 5: Impact at all on consumers willing to spend.
Speaker 3: Now, I think overall the consumer is going to spend
Speaker 3: for the holidays. You know, it is a more truncated period.
Speaker 3: But just for that when we when we look at
Speaker 3: the behaviors, so for the two weeks around Thanksgiving, and
Speaker 3: it was late this year, right, I think it's as
Speaker 3: late as it can get. We did see that spend
Speaker 3: go up, and so I think it's just going to
Speaker 3: be a more truncated period.
Speaker 5: What would you be looking for if you see any
Speaker 5: cracks of this resilience.
Speaker 3: I would look to their spending patterns first. Again, borrowing
Speaker 3: we will always look at as a bank. But the
Speaker 3: borrowing behaviors are still really strong. They're still paying credit
Speaker 3: cards off at a pace that's faster than it was
Speaker 3: pre pandemic. That's a really good sign. And then the
Speaker 3: liquidity in their their checking and their savings accounts, and
Speaker 3: you know, I think we've seen that really kind of
Speaker 3: flatten a little bit, and as we get into twenty
Speaker 3: twenty five, I would I would expect to see that
Speaker 3: start to grow again.
Speaker 1: I'm trying to build on what Amoru is talking about.
Speaker 2: There seems to be a disconnect and please help us
Speaker 2: with this, because on one hand, in this survey, you
Speaker 2: talk about the gap between the wealthiest and lower income
Speaker 2: cohorts narrowing actually marginally.
Speaker 1: You talk about robust firepower.
Speaker 2: In their bank accounts, You talk about ability and willingness
Speaker 2: to borrow, and then you talk about looking to stretch
Speaker 2: their dollar.
Speaker 1: This kind of behavior that you typically.
Speaker 2: See on the brink of something that does feel like,
Speaker 2: to Danny's point, a weakening.
Speaker 1: So what gives why aren't.
Speaker 2: People spending more in a traditional and free willing way
Speaker 2: when the data seems to suggest.
Speaker 1: It'd be in a position to do so.
Speaker 3: I think that we've seen a permanent shift in what
Speaker 3: the consumer wants as a liquidity position in their account, right.
Speaker 3: So I think they got used to that during the pandemic,
Speaker 3: saying I have more cushion in my bank account and
Speaker 3: I'm going to keep that there, and then they're making
Speaker 3: the trades into lower cost goods to make sure they
Speaker 3: keep that and maintain that level. So, you know, I
Speaker 3: think that's one of the trends. But I think it's
Speaker 3: the consumer who is very educated, very aware there are
Speaker 3: deals everywhere. They're in social media. We know that thirty
Speaker 3: percent of our clients are planning to buy in social
Speaker 3: media this year, which is very interesting, and so I
Speaker 3: think they're they're very aware and very informed and making choices.
Speaker 4: Is that the same thing as price fatigue, because we've
Speaker 4: heard that a lot among companies that you know, their margins,
Speaker 4: they can't keep expanding it because there's fears that people
Speaker 4: aren't willing to pay up. Is that the same different
Speaker 4: side of the same coin.
Speaker 3: I think it could be, yes, And I think you know,
Speaker 3: it's consumers again making very informed choices and taking control
Speaker 3: for themselves as to where they can spend their money,
Speaker 3: where they can budget.
Speaker 1: Hally O'Neal of Bank for America, thank you. This was
Speaker 1: really really interesting, Holly O'Neil. They're with U.