Economist: Consumers are 'prioritizing travel-based spending' despite inflationJune 2, 2022
Even though inflation is at its highest level in 40 years, people still want to spend money on travel.
“You are seeing some movement away from some big-ticket goods towards more experience-based spending, particularly prioritizing travel-related spending,” Mastercard Chief U.S. Economist Michelle Meyer told Yahoo Finance Live (video above).
Meyer said that as the nation re-opens and stimulus money has dwindled, consumers are moving away from home remodeling expenses during the pandemic to spending on travel.
For instance, flight bookings were up 25% in April to pre-pandemic levels, according to a Mastercard Economics Institute report on consumer spending habits. And so are prices. One expert told Yahoo Money that a 2022 summer vacation could cost between 25% and 50% more than last summer’s.
Even though gas and grocery prices are rising, Meyer noted that consumers are balancing spending on those necessary expenses with discretionary spending on travel. The effects of shrinkflation, when consumers get less of a product while being charged more money, hasn’t affected flight bookings.
“That has become a bigger share of the consumer wallet because prices are higher for those necessities, so that means the consumer has to think very carefully about what else they’re going to spend on with a certain amount of income coming in,” Meyer said. “One thing to note when we’re looking at the travel-related data, we’re looking at bookings, we’re looking at quantity, and quantity has remained very, very strong.”
Meyer told Yahoo Finance Live that the survey found that consumers are going to find a balance between spending on travel and groceries.
“They’re going to use their savings, they’re going to use credit cards. We are seeing evidence of that. But these decisions that the consumer has to make, I think, are going to be ongoing as we look into the medium term and as the economy finds this new balance,” Meyer said.
Meyer said that consumers spending on travel will benefit the overall economy.
“Once they actually take that trip, they’re going to spend when they’re on vacation or when they’re traveling for work. They’re going to spend on cars, they’re going to spend on restaurants, and other types of experiences,” Meyer said. “So there’s still momentum in terms of consumer spending on those types of activities related to travel, related to getting back on the road, whether it’s for business or for pleasure.”
Ella Vincent is the personal finance reporter for Yahoo Money. Follow her on Twitter @bookgirlchicago.
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