Big banks remark on "resilience" of U.S. consumers

It’s a big week for big bank earnings, and the current geopolitical situation could swing things either way for the finance industry.

But now that Goldman Sachs, Citigroup, JP Morgan, Wells Fargo and, most recently, Bank of America have released earnings, it seems things are going just fine. They all reported healthy growth and painted a picture of an economy that continues to chug along despite, well, everything.

Banks can still make money when the rest of the economy goes haywire. They can collect fees as money moves around during a market freakout or helping distressed companies sell assets.

But what’s notable about this weeks’ earnings is what they say about consumers. Tom Essaye, founder of Sevens Report Research, said banks are in a good position to know how consumers are doing.

“They're essentially financial supermarkets, and they really have a 360-degree view of most American consumers financial lives now, whether its through checking, loans, credit cards,” he said.

Bank leaders kept using the same word to describe them in earnings calls: resilient.

Despite consumer sentiment falling to an all-time low and rising gas prices, consumers continue to spend — at least, well-off consumers.

“If you're on the lower-income cohort, you're getting squeezed harder and harder and harder. And that is a problem, but it's not a big enough problem yet to sort of put the whole economy in jeopardy,” Essaye said.

But it could become a problem as higher energy prices trickle through the economy, said Chris Stanley, a banking strategist at Moody’s Analytics.

“The thing that we should keep an eye on here is inflation and inflation expectations,” he said.

Lately, consumers are expecting inflation to grow. That can become a self-fulfilling prophecy.

“It could be people worried that prices are going to continue to go up, and they might be pulling some of that spending forward,” Stanley said.

A spending surge can lead businesses to increase prices even more.

But the biggest factor for consumers, according to Gerald Cohen, an economist at the University of North Carolina at Chapel Hill, is jobs.

If the labor market is strong, consumer spending will be too. Lately? “It's been volatile. Fine but worrying,” Cohen said.

You might say, resilient — for now.