Bank of America CEO says weak December sales aren't relevant as 'we are now in mid-February'

Bank of America CEO Brian Moynihan is optimistic about the economy despite retail sales flatlining in December last year. In an interview with CNBC, the CEO negated the concerns of a K-shaped economic slump, citing the bank's real-time data that suggests January spending was up by nearly 5%. Moynihan expressed that the numbers align with strong economic growth, and as soon as the "regulatory pendulum" settles down in the middle, there is potential for a boom. 

As per the Commerce Department's report on December retail sales, consumer activity slowed down in the holiday season as growth remained flat following a meagre 0.6% increase in November. While economists surveyed by Dow Jones expected to see growth of 0.4% for the last month of the year, the figure fell well short of expectations, according to CNBC. Following the report, economists adjusted their view of the economy, with Ernst & Young’s Gregory Daco calling it a “paradox,” where headline figures are masking polarization, while low and middle-income families are struggling to make ends meet. 

However, Moynihan's take is a significant break from the bearish view. He made a broader point, telling CNBC that the market is taking a myopic view and people are fixating on a single data point that came in below expectations. He suggested that instead of focusing on weak December sales numbers, the market should see the current data to gauge the state of the economy. "It was December, and we are now in mid-February," he said, before sharing that the bank's real-time data shows consumers spent $68 million in January, marking robust growth. "That is 5% more money in the economy than last January," Moynihan noted. 

Coming to the concerns of a K-shaped economy, Moynihan's tone was reassuring as he claimed the core insight is behavioural. He claimed that the trend of the wealthy American spending more shows that people are employed and earning more, and it further seems to be adjusting, not retreating. Earlier, Bank of America's Chief Financial Officer, Alastair Borthwick, told reporters that the bank wasn't seeing the K-shaped bifurcation in its data, claiming that the trends among their customers with FICO scores of below 660 looked the same as those above it. However, in the broader economy, the bifurcation remains, as according to a recent Moody’s Analytics breakdown cited by Axios, about 59% of consumer spending, the primary growth driver, comes from the top 20% of earners, which makes the economy heavily dependent on the wealthy consumers. 

When asked if the regulatory framework has supported the banks, Moynihan said policies have been largely favorable, and it will be great to see the pendulum settle down, as banks “reflect the economy,” which needs better regulatory balance and capital flow that will support further growth. Moynihan's views were further supported by the January job growth report, shared by the Bureau of Labor Statistics, on Wednesday. As per the latest data, the U.S. economy added 130,000 jobs above the Dow Jones consensus estimate for 55,000, as per CNBC. Furthermore, unemployment fell to 4.3% from the record levels of 4.4% in December.

More on Market Realist:

Bank of America to award shares worth $1 billion to all employees except senior management 

Bank of America CEO reveals why the Fed should be independent: 'The markets will punish people'

Even Trump admin wasn't prepared for what January's job market report revealed