US consumers have demonstrated a willingness to continue to pay higher prices in the face of a sluggish economy that could be tipped into a recession, according to credit card giants American Express spirit Bank of America.
American Express on Friday 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.
The demand for travel is particularly resilient as Americans make up for postponed trips due to the pandemic. Consumers are also splurging on food and entertainment after pandemic lockdowns eased.
American Express said its travel and entertainment segment saw spending climb 57% from a year ago with volumes in its international markets surpassing pre-pandemic levels for the first time in the third quarter.
“Card member spending remained at near-record levels in the quarter,” American Express CEO Stephen Squeri said Friday on an earnings call. “We expected the recovery in travel spending to be a tailwind for us, but the strength of the rebound has exceeded our expectations throughout the year.”
Bank of America isn’t experiencing any slower growth in spending either, despite inflation having reached historic highs. CEO Brian Moynihan said earlier this week that the bank’s customers continue to spend freely, using their credit cards and other payment methods for 10% more transaction volume in September and the first half of October than a year earlier.
“Analysts might wonder whether the talk of inflation, recession and other factors could [result] in a slower spending growth,” Moynihan said Monday during a conference call. “We just don’t see [that] here at Bank of America.”
Recent economic data, though, have shown signs of stagnation in consumer spending. Retail and food services sales were little changed for September after rising 0.4% in August, according to the advance estimate from the Commerce Department.
Consumers might have started to grow guarded about splurging as prices moved sharply higher and the Federal Reserve raised interest rates to slow the economy.
— CNBC’s Hugh Son and Jeff Cox contributed reporting.