Los Angeles Times

Shoppers opt for cheaper brands amid inflation

Consumers are changing spending habits as they face the price increases, credit card execs say.

- Bloomberg

Credit card executives have started to see U.S. consumers shift their spending to lower-cost products as they grapple with inflation at its highest level in 40 years.

Overall volume on credit cards soared 20% to $1.1 trillion at the country’s largest lenders in the second quarter, with many of them reporting record spending for the period. Executives said the recent surge in prices has done little to lessen consumers’ appetite for either travel or goods and services.

“They’re continuing to spend very rationally, they’re continuing to pay us back,” Synchrony Chief Financial Officer Brian Wenzel said in an interview, adding that rising prices seem to be leaving customers deciding, “I may not be getting Ben & Jerry’s ice cream, I may get Breyers ice cream.”

Before second-quarter earnings were announced, investors worried how U.S. consumers were handling myriad headwinds, including soaring inflation and rapidly rising interest rates as well as the persistent COVID-19 pandemic. But, one by one this week, credit card executives said consumers seem to be holding up well.

“While there may be clouds, they’re far enough out there,” Roger Hochschild, chief executive of Discover Financial Services, said in an interview. “Consumers in our segment remain in good shape.”

Heading into the year, U.S. consumers had amassed $2.5 trillion in excess savings, which they’ve used to continue to pay down debt and keep up with their bills. Net charge-off rates at the country’s five largest credit card lenders dropped to an average of 1.9% in the second quarter from 2.6% a year earlier.

“I’m struck by, though, the strong starting point for consumers as we look into the potential headwinds of inflation and more economic trouble,” Capital One Financial Corp. CEO Richard Fairbank said on a conference call with analysts. “I would contrast this, of course, to the Great Recession or the Great Financial Crisis, where the consumer was in a much weaker position going into that.”

American Express Co. said Friday that spending on travel and entertainm­ent surpassed pre-pandemic levels for the first time in April, a surge that helped boost worldwide billed business to a record $340 billion in the second quarter. The firm’s shares surged as much as 7.1% in intraday trading after reporting secondquar­ter results and ended the day up 1.9%.

“When you look at the bookings that are further out three to six months, they’re as strong today as they were back in May,” AmEx CFO Jeff Campbell said in an interview.

Recently I went to the city of Los Angeles’ North Central animal shelter to see if my lost cat was there. It wasn’t, but I hadn’t been there in years and was totally impressed at the way it is now.

The shelter was clean, bright and had areas to meet and play with animals. There were lots of helpful employees, even in the small animal room. Every animal had food, water and was clean. There was no smell.

Sadly, there seemed to be row after row of caged dogs. That no one has enough time to take them all out routinely to walk is not surprising.

Instead of tearing the city’s shelters down, The Times should focus on whose fault this is: people who abandon their animals because they are inconvenie­nt in some way, and people who pay $2,000 for a “pure-bred” dog instead of adopting.

Lore Spangler Los Angeles

A barrier to shelter dogs being adopted that I rarely see mentioned is insurance companies’ restrictio­ns on what kinds of breeds policyhold­ers can have in their homes.

I am looking to adopt a rescue dog. A large percentage of shelter and rescue dogs are all or part pit bull, Rottweiler, chow chow or Doberman. My homeowner insurance policy with Safeco does not cover a residence with a dog that is all or part any of these breeds.

I’ve looked into alternativ­e insurance. All of the companies that don’t have dog breed restrictio­ns offer inferior coverage for a higher price.

Ellen Nadel Los Angeles

Thanks for exposing the disaster in Los Angeles’ animal shelters.

Stop breeding animals, folks. Get pets at a shelter. And while you’re at it, stop breeding humans. Eight billion people on the planet — insane.

Ann Bradley Los Angeles

If you are as disgusted as I am with the city over the terrible condition of our animal shelters, please call and write your council member and the mayor about this.

More money, more personnel and improved facilities for the city are needed now.

William Majors Woodland Hills

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