Americans Still Spending on Credit Cards, Despite Economic Pessimism

New York, NY, April 18, 2022-U.S. consumers say they aren’t feeling great about the economy but have a curious way of showing it, reports the Wall Street Journal.

“Pessimism about the economy has been on the rise due to surging inflation and falling household income since pandemic-related stimulus programs expired. But the latest round of bank earnings shows that apprehension hasn’t kept Americans from reaching for their credit cards.

“First-quarter spending was up 23% on Citigroup Inc. credit cards, compared with a year ago. Spending rose 29% on JPMorgan Chase & Co. cards and 33% on Wells Fargo & Co. cards. Bank of America Corp. , another big card issuer, is scheduled to report first-quarter results Monday.

“Consumers are sending mixed signals about their confidence in the economy, Goldman Sachs Group Inc. Chief Executive David Solomon said Thursday. 

“In some ways, the quarter was a return to prepandemic buying habits: At JPMorgan, spending totaled $236.4 billion, 37% higher than in the first quarter of 2019 and up 59% from its 2020 nadir. Bank executives pointed to higher spending on categories like travel, entertainment and dining as evidence of consumer strength. On Chase cards, travel and dining spending on rose 64% in the first quarter.

“‘People like getting dressed up to go to dinner again in a restaurant,’ Citigroup CEO Jane Fraser said Thursday.

“Some of the increase is due to rising costs. Consumer prices rose 8.5% in March from a year earlier, the highest rate in decades. Supply-chain snarls, strong consumer demand and rising energy costs led to higher prices for grocery staples and airplane fares. Spending on gasoline jumped sharply in March after Russia invaded Ukraine.

“What’s more, borrowers have been slower to pay down their balances in recent months. Credit-card loans rose 15% from a year ago at JPMorgan, 7% at Citigroup and 14% at Wells Fargo. That could be a sign that more people have exhausted savings they built up during the pandemic.

“Still, inflation doesn’t seem to be straining household balance sheets just yet, JPMorgan chief financial officer Jeremy Barnum said on a call with analysts Wednesday. Delinquencies remain below prepandemic levels. Even lower- and middle-income households aren’t giving the bank cause for concern, Mr. Barnum said.

“Jamie Dimon, the bank’s CEO, said he wouldn’t normally expect net charge-offs, the amount the bank doesn’t expect to collect, to fall below 2.5%. It has now been below 1.5% for three straight quarters.

“‘Charge-offs are extraordinarily good,’ he said, ‘as a matter of fact, way better than they should be.’”