Amex Customers – Above-Average-Income Consumers – Are Spending like Drunken Sailors, incl. on Travel & Restaurants

Lambert here: Carpe diem….

By Wolf Richter, editor of Wolf Street. Originally published at Wolf Street.

They’re the Big Spenders, they can move the needle. Millennials and Gen Z-ers are now the drivers of this growth.

American Express has long marketed its cards to the above-average-income segment of consumers – not just the high end, but the vast population of above-average income consumers. They’re the bigger spenders, and particularly spending on travel services and restaurants. Amex started the trend of premium cards decades ago with its Gold, Platinum, Business Platinum, etc., that all come with hefty annual fees and offer a variety of services. These cards are marketed to people who use them a lot and pay them off every month.

So this is not the lower-end of the income segment, but the above-average-income segment, the vast numbers of big spenders.

And Millennials are now with both feet in that segment, and Gen Z-ers are moving into it, and they have AmEx cards, and AmEx is marketing to them, and they’re applying for Amex cards, and turns out, they’re spending with their Amex cards, along with the rest of the Amex cardholders.

And at least these above-average-income consumers, those that can move the needle if they’re in the mood, are now in the mood.

This is what Amex said about its customers spending patterns in Q1 in its quarterly report yesterday:

  • “Our first-quarter results reflect strong growth in Card Member spending and continued high engagement with our premium products.”
  • Revenue grew 22% year-over-year, to a quarterly record
  • Card Member spending rose 16% on an FX-adjusted basis.
  • Travel and Entertainment spending soared 39% on an FX-adjusted basis.
  • “In March, we saw a record level of reservations booked on our Resy restaurant platform.”
  • Spending in its International Card Services segment jumped 29% on an FX-adjusted basis.
  • Amex added 3.4 million new cards in Q1, “with U.S. Consumer Platinum and Gold, U.S. Business Platinum, and Delta co-brand account acquisitions all reaching record levels.”
  • Millennial and Gen Z consumers continue “to fuel this growth” in new cards, accounting for over 60% of all new consumer account acquisitions in Q1.
  • “Millennial and Gen Z customers also continued to be our fastest growing U.S. cohort in terms of spending, growing 28% from a year earlier.”

And not falling further behind.

“Our customers have been resilient thus far in the face of slower macroeconomic growth, elevated inflation and higher interest rates, with credit performance remaining best-in-class,” it said.

Total provision for credit losses in Q1 2023 was $1.1 billion, or 7.4% of revenues. As revenues have risen over the years, the credit losses have risen as well, but somewhat more slowly, and as a percent of revenues were somewhat better in Q1 2023 than during the Good Times before the pandemic:

Total provision for credit losses as a percent of “total revenues net of interest expense”:

  • Q1 2023: 7.4%
  • Q1 2019: 7.8%
  • Q1 2018: 8.0%
  • Q1 2017: 6.6%

So one of the reasons for the amazingly resilient consumer spending, even adjusted for inflation – “resilient” despite all the headwinds of asset price declines, inflation, layoff announcements, bank collapses, etc. – is that the above-average income segment, the big spenders, are now out there spending like drunken sailors, and much of it on services, particularly travels and restaurants.

And some of this spending is driven by Millennials and Gen Z-ers that have in huge numbers moved into their high-earning years and high-spending years, and they’re doing it.

Consumers in that segment at least are not “tapped out” or whatever, and they’re not falling behind on their cards anymore than they did during the Good Times before the pandemic.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


    1. some guy

      Is Martha Gill confusing “boomers” and “rich people”? Is she including homeless boomers in her article?
      Is she accusing the several million de-jobbed, pre-emptively de-pensioned boomers in her article?

      Is she really too stupid to see the difference between rich and poor boomers? Or is she too malicious to admit to the social class truth she knows all about?

      This ‘Martha’ person shouldn’t expect any undying affection from me.

      1. FD

        Thanks for saving me the pain of reading it. I saw the masthead for the page, the caption of the picture, first couple of lines and with your comment I knew exactly where this was going.

        The thing is – I’ve heard it all before, when Gen Xers like myself were that age. This was basically the push behind Copeland’s book Generation X – but now somehow Gen X has been lumped in with Boomers as having all these chronological and population benefits and none of the detriments.

        One thing the article author seems to bemoan is something a lot of Gen Xers wished they could have had – an older cache of workers that would actually retire and open up some career opportunities. Part of the original “problem” for Gen X was that positions wouldn’t open up ahead of them because for Boomers “65 was the new 35” or some such nonsense.

        The generation thing was always a marketing BS game and it’s only gotten worse. Great way to build in a divide and conquer mechanism.

  1. Cetra Ess

    I’m just noticing the phrasing of “above-average-income” and seeming care taken not to conflate this group with “affluent” or “wealthy”. Wolf seems to know the difference. I think many readers may assume this is the affluent segment and take this piece as meaning Millennials and Gen Z-ers are doing quite well, have nothing to complain about. But if a segment has employment income, above average or not, they’re unlikely to be affluent. To be affluent they’ll need to have sufficient wealth to be able to live off their own financial instruments or inheritances without need for employment income. Wolf doesn’t spell out if this above-average-income is employment income or not, but I think he means employment income.

    Here in Toronto there’s a running joke about Toronto Life magazine, which constantly publishes feature stories about Millennials who are “independently” successful, own several Toronto properties, etc., which they write up as if it was the result of hard work and savings, but it always turns out, in each and every case, they had significant help from the bank of Mom and Dad. It’s hard to tell if the magazine is tone deaf, rubbing everyone’s faces in it, or if they’re subtly mocking these people they feature who aren’t in on the joke, think they’re wonderful and all that. My point is, if you’ve got 3+ properties in the Toronto real estate market, you’re likely living off the proceeds, not employed, and the initial investment was your inheritance money, and I would not consider these to be “above-average-income”. Above-average-income is probably what we used to call yuppies.

    1. TimH

      The most important feature of someone who successfully starts a business: rich parents.

      Actually not quite true. The independent funding avoids losing control and getting boned a bit later by external finance. See Cisco as an example of founders being pooched. So let’s call it “starts and keeps control of”, not just “starts”.

    2. aletheia33

      i would guess the magazine is simply selling ads aimed at the audience they are describing in their features, which are also basically a form of advertising. also seducing this audience, by stirring up envy, to compete with their peers in one-upping one another, via constant spending on the advertised products.

  2. redleg

    Here’s my question:
    How much of the workforce has to travel now vs. pre-Covid?

    I know I’m one person, but I have an Amex and use it for work expenses.
    Prior to 2021, i rarely had to travel for work, and when I did it was within about a 250 mile radius.
    Since then, I’ve found myself traveling all over the country for work. If I drive to a project, there’s fuel, meals, hotels, some supplies, sometimes a rental vehicle, etc. that all get expensed. If I have to fly to a project, I have to re-purchase most of my field supplies, rent a car, hotel, etc. that all gets expensed. It can get to be a large amount, and would not be spent at all of a local firm did the work.
    Could the increase in spending be work related?

    1. albrt

      I’m curious about this dynamic. What led to the increase in travel? Did the other local firms go out of business? Or is it that there is less work and you have to take jobs farther from home?

      1. redleg

        Based on my situation, both.
        Some of my local jobs have out of state project managers, and my out of state work where I’m the project manager has local contractors. It’s strange.

        Lots of consolidation, just like every sector, and many small consultants are getting passed over for the big boys.

  3. Jokerstein

    Oracle, upon hiring someone, requests that every one applies for the corporate AmEx card. It is granted to all employees, so it’s not dependent on the individual’s credit history. It’s just the standard green version.

    1. TimH

      I was forced to get a company Amex card for expenses etc, and the Ts and Cs made me jointly liable.

    2. Mike

      My hundreds of coworkers and I at a previous employer also had corporate AmEx cards. We weren’t supposed to charge personal items so the spending was all hotels, flights, restaurants, taxis, etc.

    3. Green Monster

      Actually, it depends on the company. A large company I know had their employees take out corporate credit cards with the liability on the employee. The company was embarrassed when 35% of their employees had such poor credit that they didn’t qualify. The company had to switch the program to company liability to get all of their employees cards.

  4. tevhatch

    I’d expect a large part of Amex’s customer base to have made out like bandits under COVID, so the idea that they would spend when released from lockdown, unlike the poor stiffs with only Visa/Mastercard or ATM cards, who have to return to the office and work isn’t a surprise to me.

  5. Rubicon

    Those who point out “who” has the means to spend, should look at longitudinal studies.
    If you look at the huge population %age of Americans, from the 50s-to the end of the 70s, who had good paying jobs, low health care, insurance, bank costs AND compare their relative wealth with that of the Millennials, X-ers, you would see a remarkable difference in the remarkable lower SIZE of X-ers/Millennial Generations VS the 50s-70s crowd.
    And as someone pointed out here, a good part of those X-ers/Millennials, are beholding to the wealth of that 50s-70s crowd who pay for the “good times” of this current population.

    How folks like Richter fail to make comparisons in those longitudinal studies, makes one question the validity of their argument.

  6. some guy

    How many of them have “above average income” as against how many of them make too little to save any money so decide they might as well spend it all freely on pleasant experiences in the now?

  7. Stoney

    During inflation the value of cash decreases and the value of goods and services increases thereby increasing spending for those who can afford it.

  8. JBird4049

    If much of this is on travel and restaurants, what does that say about the future health of these high spenders? I suppose that the unfortunate deaths of some of people in the Credentialed and Productive Class would be a good cover for all the deaths in the Disposable and Deplorable Class.

  9. Savita

    Here in Australia, since forever, I’ve so often seen a little sign at the register for small businesses,cafes,restaurants. Either Amex not accepted, or it’s the only card an additional surchage is applied to.

    In articles such as this one. Or articles decrying the attempts by banks and credit card companies to restrict access to cash. There will often be a comment from someone saying, well they only use a card, for everything, and they do so because they get cashback,and they get rewards – isn’t it great?

    In contrast, NC has published multiple pieces explaining how card rewards programs, including frequent flyer programs, essentially punish everyone in order to reward the few. Everyone pays for those rewards, but only a few get to benefit from them.

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