American Express (AmEx) raised its annual revenue forecast on Friday as consumers have spent heavily on their cards, shrugging off the highest inflation in decades and the threat of a recession, sending the company’s shares up a 5% before the opening of the market.
Major US banks, such as JPMorgan Chase Y Citi Grouphave pointed to the resilience of consumer spending in the face of an uncertain economic outlook in recent weeks, a positive sign for card companies.
AmEx he said he now expects full-year revenue growth of between 23% and 25%, up from 18% and 20% previously.
Spending on the company’s cards rose to record levels in the second quarter, with travel and entertainment exceeding pre-pandemic levels for the first time and spending by millennials and the generation Z jumping almost 50 percent.
This helped AmEx post net income of $2.57 per share, beating the $2.41 expected by analysts, according to Refinitiv data.
“Despite the fact that America’s socioeconomic environment appears to be plagued by recession fears, we’ve seen consumer spending continue to trend upwards over the past 18 months,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.
“Given the price inflation is faster than wage inflationit may make sense for a family to buy some high-value durable goods now rather than wait for items to rise higher relative to wages.”
The deteriorating economic outlook, however, prompted AmEx to add $410 million in loan loss provisions, a stark contrast to a $606 million gain a year ago.
The New York-based company’s efforts to attract customers by spending on rewards and perks also pushed spending up nearly a third, to $10.4 billion.
