Citigroup Inc. Chief Executive Jane Fraser highlighted that the consumer economy continues to display a divergent trend, with affluent consumers experiencing positive outcomes while lower-income individuals exercise caution in their financial decisions.
The financial services giant has been closely monitoring the spending habits of individuals, observing an upward trajectory for some while others are reducing their expenses.
“There has been significant growth in spending, particularly in recent quarters, among the affluent customer,” Fraser shared during her appearance on CNBC at the 2024 Milken Institute Global Conference. There has been a noticeable shift in the spending habits of low-income consumers, with a more cautious approach being observed. They are increasingly burdened by the rising cost of living, which has been a significant source of stress for them.
Although employment rates are strong for both lower-income and higher-income earners, moderate wage earners face higher levels of debt-servicing.
According to her, individuals with lower credit scores and limited financial means could potentially find relief from interest payments if interest rates were to decrease.
“They are certainly experiencing increased stress,” Fraser remarked. They are fulfilling their rental obligations. They don’t have a 30-year fixed-income mortgage with low rates. So, it seems like they are experiencing a greater impact from inflationary pressures. And I believe, just like everyone here, we’re all eager to witness the improvement in economic conditions that will lead to a sooner rather than later decrease in rates.”
With improvement in supply chains easing shortages of goods, inflation remains persistent around services, she said.
“Services is definitely the stickier one, but things are headed in the right direction,” Fraser said. “It’s just, we’d love it if it would go faster that way than it has been.”
Fraser’s comments came after JPMorgan JPM, +0.78% Chief Executive Jamie Dimon said last month that roughly the bottom fifth of U.S. consumers are struggling with inflation and income challenges, but overall the economy remains in good shape.
“If you go to rural America or inner cities, I’m not sure they feel they’re being lifted up by this economy,” he said.
