Title: Bank data shows U.S. consumer financial health holds up amid rising inflation

Jul 19, 2022 06:07AM ET

By: AnalysisWatch

Americans' financial health held up well in the second quarter even as inflation sent gas and grocery bills higher and ate into savings for the first time since the pandemic, U.S. bank executives said.

Second quarter spending and deposit data from the country's largest lenders including JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC). and Wells Fargo (NYSE:WFC) & Co has shed new light on the health of U.S. consumers - a key indicator that offers clues on the likelihood of an economic recession.

U.S. consumer prices jumped 9.1% in June, the largest increase in more than four decades, with gas surging 11.2%. Runaway inflation has led the Federal Reserve to hike rates, increasing borrowing costs and sparking recession fears.

Still, bank executives across the board said consumers - who were mostly able to boost savings during the coronavirus pandemic - were financially healthy, as evidenced by strong spending and few signs of credit deterioration.

Combined debit and credit card spending rose 15% from the second quarter of 2021, JPMorgan reported on Thursday, while Bank of America, the second-largest U.S. bank, said credit and debit card spending rose 10% on last year.

While data this month showed the U.S. economy added more jobs than expected in June, it could still be on the verge of a recession after gross domestic product contracted in the first quarter.

Executives said growth in consumer spending will likely slow in the second half of the year as inflation, as high interest rates and economic fears weigh on consumer confidence. They also noted the impact of inflation could be seen in the data.

For now though, credit quality is still strong. Consumers for the most part continue to have more cash in their accounts and are still paying down credit card balances every month at a greater rate than before the pandemic, executives said.

Moynihan, for example, said he saw "no deterioration" in customers' credit worthiness and indeed saw quite the opposite: its average customer FICO credit score for card loans was 771 in the second quarter, well above the threshold at which borrowers are considered a safe bet.

However, with shifting spending habits, inflation and the end of COVID-19 pandemic federal assistance, some consumers are starting to see savings shrink, executives said.

When pressed by analysts on early warning signs of trouble, Barnum said loan delinquencies among low-income customers were also beginning to rise, while staying below pre-pandemic levels.