7/14/2022: Consumer Spending is Still Robust
$JPM's earning report shed light on the current state of US economy
JP Morgan Chase just issued their Q2 2022 earning report this morning. There are a few interesting data points coming out of this report. Consumers pulled back on spending on big ticket items. Mortgage originations are down 45%. Auto loan and lease originations are down 44%. But spending on Chase credit cards rose 21% from a year ago and 15% from the first quarter. Chase customers also started carrying more credit card debt, with card loans up 17% from a year ago.
Chase’s customers tend to be more affluent so these data points might not be fully representative but it still provides good insights on current consumer behavior. Basically, except for big ticket items, consumers are actually spending more despite all the recession/inflation narrative. This corresponds to my personal experience of increased spending on experiences like dining and travel after the omicron wave. It would be interesting to see if this increased spending would slow down after this hot summer travel season. My hunch is people would continue to spend on experiences if they could afford it. But this would also mean the supply side constraint will continue and inflation will be here to stay.
Jamie Dimon, JP Morgan Chase’ CEO, also made the following comment in the earnings release: “The U.S. economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy. … But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road. ” In summary, things look pretty good right now but the outlook is quite worrisome.
With this report, chances are Q2’s GDP would not turn out to be negative like Q1’s. In other words, thanks to US consumers, we are probably not in a recession yet.