Bank of America Chairman and CEO Brian Moynihan cautioned that while the American consumer remains a powerful force keeping the economy afloat, the middle class is beginning to feel the strain.
Joining “Mornings with Maria” on Tuesday, Moynihan shared his outlook on the average U.S. consumer and warned the economy could slow down amid the ongoing government shutdown.
“You’re still seeing growth among median income households, at up to… 75,000, 100,000. They’re still growing, but they’re growing at a slower rate than the higher-income households above that. So that shows you some of the pinch,” Moynihan said, citing Bank of America research.
“Now, inflation’s still high and prices still are on people’s minds, but they continue to spend,” he continued. “What’s incongruous is when you really look [at] what the people do, they’re actually spending the money. But there is a differential. And so this is where you’ve got to be careful. From a human being standpoint… that’s an issue for American society from the average consumer spending.”
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Last Friday, the Bureau of Labor Statistics reported that the consumer price index (CPI) – a broad measure of how much everyday goods like gasoline, groceries and rent cost – rose 0.3% in September from the prior month and increased 3% year over year, up from 2.9% in August. It was the highest headline CPI reading since January, when it was also 3%.
The CPI report was the first government economic release since the federal government shutdown began on Oct. 1.
High inflation has created serious financial pressure for most U.S. households in recent years, forcing families to pay more for necessities such as food and rent. Price hikes have hit lower-income Americans the hardest, since they spend a greater share of their income on essentials and have less flexibility to save.
“When you think about the American economy, obviously, the U.S. consumer is one of the most powerful engines on Earth. The size of what it does is as big as almost every other economy. So what we see in October so far, so last quarter, we saw about 5, 5.5% of spending, them putting money into the economy out of their accounts in every way they do it – credit card charges, debit card charges, checks written, cash out of the ATM. That’s actually growing at a little higher rate in October here. So the consumer continues to spend,” Moynihan said.
“Now the big worry is, well, will that all hold as the shutdown and tariffs continue on? And that’s the question on everybody’s mind,” he added.
“The government shutdown, an argument over the budget and everything, that is a political process. But from an economic perspective, ultimately, it’s going to slow down the economy because the need to get approvals from the government to do things, whatever it is, slows down… as it goes on longer, it affects more parts of the economy because activities that need approvals, need things getting done, just can’t get done. And so I hope they resolve it.”
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FOX Business’ Eric Revell contributed to this report.
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