After two years of heavy spending, deprived of vacations and other experiences in lockdowns caused by the pandemic, Americans may be on the brink of withdrawal as a cooldown that helps curb inflation.
For two years, the country has witnessed a red-hot picture of “revenge spending,” which economists and business executives have attributed to a surge in entertainment spending following coronavirus lockdowns. As demand increased, so did prices for flights, hotels, and other popular services.
But many of those price categories are cooling off right now. Hotel rates Airfares have seen a significant slowdown in year-on-year growth recently, with airfares flattening out. If this trend continues this summer, it could contribute to the slowing in overall services inflation that the Fed has been watching and waiting for.
“We are seeing some slowdowns in the so-called revenge category,” said Elena Shulyatiyeva, senior US economist at BNP Paribas.
New inflation data to be released on Tuesday could indicate whether travel-related spending growth will slow further in May. Some economists doubt this. Analysts at Goldman Sachs expect hotel prices and other recreation-related expenses to rise in May, when the summer vacation season begins.
Omail Sharif, founder of Inflation Insights, expects airfare and hotel prices to have a modest impact on inflation in May’s data, but will deduct significantly from inflation in June and July. . He does not expect hotels and domestic air travel to experience the surge this summer saw last year.
“You don’t get the same kind of pop anymore,” he said. “Air fares have almost stalled.”
Consumers are not only returning to more normal patterns of life, they are also facing high costs after years of rapid inflation, and fear a Fed rate hike could quickly plunge the economy into recession. , may be becoming increasingly cautious.
