The Effects of Recent Fed Rate Cuts on Consumer Spending and Technology Investments

Consumer Spending and Sentiment Post-Rate Cuts

Post-rate cuts, consumer spending shows mixed signals: low-income consumers are economizing and reducing outings, while resilience persists among broader demographics. High-end spending is growing, indicating varied responses across income groups, while companies remain cautious about pricing strategies to align with shifting consumer sentiment.

"And so you're seeing with that low-income consumer, in many cases, they're dropping out of the market, eating at home and finding other ways to economize cutting down on trips." --- (MCD, earning call, 2024/Q2)

"Consumers remain surprisingly resilient despite a challenging backdrop of significantly elevated prices compared to just a few years ago." --- (TGT, earning call, 2025/Q1)

"Consistent spending across income groups. We've had more growth as we mentioned in the earlier remarks, on the high-end consumer." --- (WMT, earning call, 2025/Q1)

"In addition, changes in fuel, utility, and food costs, interest rates, and economic outlook may impact customer demand and our ability to forecast consumer spending patterns." --- (AMZN, sec filing, 2024/Q2)

"And I think we certainly are going to be prudent and thoughtful about any further price increases that we're looking at for the rest of 2024 on that backdrop and keep working on the opportunity that we've talked about a fair bit already on the affordability and getting that in place to kind of address the consumer need." --- (MCD, earning call, 2024/Q1)

Technology Investments and Future Spending Outlook

Recent Fed rate cuts have prompted significant technology investments, as seen in Amazon's $13.1 billion and $13.9 billion capital expenditures aimed at supporting AWS growth. Similarly, Oracle reported a $1 billion revenue increase in cloud services, indicating a positive outlook for future spending in technology sectors.

"Cash capital expenditures were $13.1 billion and $13.9 billion during Q1 2023 and Q1 2024, which primarily reflect investments in technology infrastructure (the majority of which is to support AWS business growth) and in additional capacity to support our fulfillment network." --- (AMZN, sec filing, 2024/Q1)

"This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company.To close, this is my 56th and last earnings" --- (GOOG, earning call, 2024/Q2)

"Our cloud and license business’ total revenues increased by $1.0 billion in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024 primarily due to a $988 million increase in cloud services revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contracts to continue to gain access to the latest versions of our technologies for which we delivered such cloud services during the period presented and a $61 million increase in our cloud license and on-premise license revenues." --- (ORCL, sec filing, 2025/Q1)

"USA News Group CommentaryIssued on behalf of Avant Technologies Inc. VANCOUVER, BC, July 30, 2024 /PRNewswire/ -- Large tech companies have ramped up their spending on developing generative artificial intelligence (genAI), banking on big financial returns in the future." --- (MSFT, press release, 2024/07/30)

"Our technology and infrastructure investment and capital spending projects often support a variety of product and service offerings due to geographic expansion and the cross-functionality of our systems and operations." --- (AMZN, sec filing, 2024/Q1)

Consumer Credit Trends and Interest Rates

Recent Fed rate cuts have led to increased credit loss allowances due to inflation and high interest rates, impacting consumer confidence. Banks have faced performance challenges linked to interest rate uncertainties, while branded card revenues have grown, indicating resilient consumer spending among higher credit score customers.

"Our allowance for credit losses would increase by approximately $625 million at March 31, 2024 if we applied 100% weight to the most adverse scenario in our sensitivity analysis to reflect continued inflationary pressures, including a decline in consumer confidence and the influence of geopolitical events, as well as high interest rates." --- (DFS, sec filing, 2024/Q1)

"The uncertainty around interest rates and the economic uncertainties that were expected to impact credit costs for banks caused banks to underperform the broader S and P 500 index for the last couple of years. More recently, we've seen a lift in our share price in" --- (BAC, event transcript, 2024/04/24)

"Branded cards revenues increased 8%, driven by interest-earning balance growth of 9% as payment rates continue to moderate and we continue to see growth in spend volumes up 3%, primarily driven by customers with FICO scores of 740 or higher." --- (C, earning call, 2024/Q2)

"I think the simplest and best answer to that is not really. So, as we've been saying for a while, migration from checking and savings to CDs is sort of the dominant trend that is driving the increase in weighted average rate paid in the consumer deposit franchise, that continues." --- (JPM, earning call, 2024/Q1)

"In estimating expected credit losses, we considered the uncertainties associated with borrower behavior and payment trends, as well as recent and expected macroeconomic conditions, including those relating to consumer price inflation and the fiscal and monetary policy responses to that inflation." --- (DFS, sec filing, 2024/Q1)

Comparison of Consumer Behavior Across Different Sectors

Consumer behavior is shifting across sectors in response to Fed rate cuts, with retailers like Walmart and Target focusing on enhancing e-commerce and reducing prices to meet value expectations. Meanwhile, Disney and Amazon highlight the demand for digital and pharmacy services, reflecting evolving consumer preferences influenced by economic conditions.

"John David Rainey: We still have lots of room to improve, but the progress we've made on the e-commerce experience across businesses, across markets, puts us in a position where we can play more offense and be more aggressive as it relates to marketing." --- (WMT, earning call, 2025/Q2)

"part, a good consumer proposition economically. But in today's consumer, used to both basically the Internet and app based experiences and ultimately AI driven experiences, wants much more than that." --- (DIS, conference, 2024/05/15)

"And secondly, I just want to ask about a small segment of pharmacy. It seems to me like at least anecdotally I seem to lean more into marketing for that and survey work suggests to us that there's kind of greater consumer interest in that." --- (AMZN, earning call, 2024/Q2)

"As Brian mentioned earlier, value remains a top priority for consumers, and we recently reduced prices of more than 1,500 items across our assortment in many markets." --- (TGT, earning call, 2025/Q1)

"And in general, we want to price a little bit behind that value so that consumers continue to think of us as a good value for them." --- (NFLX, conference, 2024/05/15)