Bank of America CEO Brian Moynihan remains optimistic about avoiding a recession, but warns of risks if consumer spending continues to decline.
Bank of America CEO Brian Moynihan said that the financial giant no longer believes that the U.S. economy will fall into a recession, although he warned that the current slowdown in consumer spending could worsen, potentially pushing U.S. shoppers into a “very negative” state that would be difficult to reverse.
Moynihan made the remarks during an Aug. 11 interview on CBS’s “Face the Nation” program, in which he discussed the bank’s outlook for the economy over the next year and a half and urged careful management of interest rate policy by the Federal Reserve to prevent a deeper economic downturn, suggesting that easing rates might be necessary to sustain consumer confidence and spending.
At about the same time last year, Bank of America was predicting that the U.S. economy would enter a recession—although the bank’s analysts have now reversed that call, Moynihan said.
“Basically, they say we go to 2 percent growth, then 1 1/2 percent growth over the next six quarters and kind of bump along at that growth rate, plus or minus,” he said.
Part of what appears to be driving Moynihan’s cautious optimism is data coming from the bank’s base of about 60 million consumers, which he said shows consumer spending grew by about 3 percent year over year in July and August of this year, roughly half the pace of growth in the comparable period last year.
“The consumer has slowed,” he said. “They have money in their accounts, but they’re depleting a little bit. They’re employed, they’re earning money, but if you look at—they’ve really slowed down.”
Moynihan said that the bank’s spending data suggest consumers are increasingly bargain hunting, in another sign that the pace of spending by the U.S. consumer may be faltering.
Unless it eases its high interest rate policy “relatively soon,” the Fed risks denting consumer confidence significantly, Moynihan said.
By Tom Ozimek
