On Tuesday, Capital One CEO Richard Fairbank provided insights into the status of American consumers during the company’s quarterly earnings call. During the call, an analyst inquired about Capital One’s assessment of the American consumer amid market concerns regarding tariffs introduced by the Trump administration.
Fairbank remarked that the U.S. consumer remains a robust component of the economy, stating this was evident across various metrics examined by the company. He noted that consumer debt service burdens are stable and close to their pre-pandemic levels. Additionally, Capital One’s card portfolio is experiencing improved delinquency rates, fewer new delinquency entries, and enhanced payment rates compared to the previous year.
While acknowledging that certain consumer segments are experiencing pressure due to the cumulative impacts of inflation and increased interest rates, Fairbank expressed confidence in the overall health of U.S. consumers. He pointed out that a larger proportion of customers are making only minimum payments on their credit cards, slightly exceeding pre-pandemic levels, which indicates that some consumers are feeling the effects of inflation and rising interest rates.
Regarding revolve rates, Fairbank mentioned that they have stabilized over the past year but remain below pre-pandemic levels for major products and segments, citing this as another positive indicator. He further discussed trends in consumer spending observed by Capital One during the year’s first quarter, stating that spending was mostly stable through the quarter’s end. However, recent weeks have shown a rise in spending growth per customer compared to last year across different customer segments, partially attributed to the later occurrence of Easter this year.
Fairbank reported an uptick in retail spending, especially in electronics in recent weeks, speculating that it might be related to consumers responding to tariffs, though time will tell. Conversely, growth in travel and entertainment (T&E) and airfare spending has decelerated somewhat. He noted early indications of a potential increase in auto purchases, as consumers may be anticipating tariff impacts, and mentioned an increase in auction prices exceeding seasonal norms.
Last month, President Donald Trump announced a 25% tariff on imported passenger vehicles and light trucks, in addition to a similar levy on certain auto part imports. The vehicle and truck tariffs took effect on April 3, while the tariff on auto parts is expected to be implemented early next month.
In early April, Trump initiated a 90-day suspension of reciprocal tariffs, applying a 10% duty during this period to countries that had not retaliated against the U.S. for reciprocal tariffs, while increasing tariffs on China to 145%.
