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The era of revenge spending is coming to a close. Last year, easing travel restrictions unleashed a wave of business spending, particularly on travel and entertainment. US businesses are now tightening their belts.

This explains the underwhelming reaction to American Express boss Steve Squeri reporting another quarter of record revenues and earnings.

Consumer spend is up. Despite high interest rates and inflation, Amex cardholders have not slowed down. US consumer billed business — a measure of spending volume — rose 9 per cent year-on-year during the third quarter. Overall, revenue net of interest expense increased by 13 per cent while net income was 30 per cent higher.

Yet shares in Amex fell nearly 5 per cent to erase gains for the year. Investors appear to have been spooked by the slowdown in corporate spending growth. This rose just 1 per cent during the period. A year ago, it grew at a 20 per cent year-on-year pace. 

Context is important. Comparisons to last year are tough. Plus credit quality remains in good shape. Borrowers at least a month behind in their card payments have held steady at 1.2 per cent for the past three quarters. The net write-off rate on card-member loans was unchanged from the second quarter at 1.8 per cent. Both figures remain below pre-pandemic levels.

Even if corporate clients are putting their cards away, Amex has other ways to make money thanks to its affluent customer base. Net card fees increased 20 per cent as Amex signed up more fee-paying users. Higher interest rates have helped boost net interest income, which rose 34 per cent to $3.4bn during the quarter. Amex’s return on average common equity stands at an impressive 38 per cent.

This is not reflected in the share price. At 12 times forward earnings, the stock is trading below its three-year average of 18 times. Investors must come to terms with the new normal for corporate spend.