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PayPal Warns that Consumer Spending is about to Fall Sharply

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New York (CNN Business)Omicron, inflation and a lack of government stimulus have some Venmo users nervous about spending money from their digital wallets. That’s bad news for Venmo owner PayPal — and a potential warning sign for consumer spending in general.

PayPal executives warned during the company’s earnings call with analysts Tuesday that its forecasts for revenue and new active users would not be as strong as the company and Wall Street had hoped. Shares of PayPal (PYPL) plunged more than 25% on the news.
Chief Financial Officer John Rainey said that “the impact of Omicron and the effect of inflationary prices combined with lack of stimulus, is having an impact on spending” and that this is “most pronounced” on lower income users.
 
 
“The persistence of inflationary effects on personal consumption, labor shortages, supply chain issues and weaker consumer sentiment have led us to adopt a more cautious outlook,” he added.
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Rising prices, coupled with continued worries about the broader economy, have weighed on consumer confidence lately. Even though wages continue to rise at a healthy clip, some consumers may simply be tapped out.
Analysts at Mizuho Americas said in a report Wednesday that the “disappointing” outlook “marks a return to earth” for PayPal “following the Covid sugar rush” that has boosted demand over the past two years.
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