A pedestrian carries shopping bags to the Herald Square area in New York, United States, Wednesday, April 13, 2022.
Calla Kessler | Bloomberg | Getty Images
Sandy Magny plans to take her teenage daughter to West Palm Beach, Florida this summer, though Air fares are on the rise.
It won’t be cheap, but Magny doesn’t want to miss the chance to visit her family. The 40-year-old legal assistant, who lives in the Bronx and works in the Manhattan Financial District, is finding that there are other things she can do without.
“I’ll bring more lunch,” he said. “I could make coffee in the office.”
Magny is one of millions of people who are starting to change where their dollars go after two years of the Covid-19 pandemic. Consumer prices have increased to clip faster in four decades. The cost of everything from lodging to latte macchiato is rising, asking the questions: when and where will consumers be cutting back?
Some companies are already feeling the impact as they try to pass the higher costs on to customers.
AmazonMost recent quarterly sales grew to slower pace since the dot-com bankruptcy of 2001. Netflix lost subscribers in the last quarter for the first time more than a decade. Videogame player Activision Blizzardappliance giant Jacuzzi Other 1-800 flowers all reported weaker sales in the last quarter.
Changes in consumer behavior have some executives nervous.
“We believe that the consumer will spend” maceis CFO Adrian Mitchell She said at JP Morgan’s Retail Round-Up last month. “But will they spend on discretionary items we sell, or will they spend on a plane ticket to Florida, or will they travel, or will they go to restaurants more?”
Consumer spending, as measured by the Commerce Department, rose 1.1% seasonally adjusted in March. And spending remains strong even among low-income families with annual incomes of less than $ 50,000, according to data from the Bank of America. (The data excludes households who do not have access to the cards.)
But consumer confidence, a measure of shopper sentiments about market conditions reported by The Conference Board, declined in April.
“We’re not really seeing many signs of a slowdown, despite concerns happening in the market,” said Anna Zhou, US economist for Bank of America.
One of the reasons is the amount of money people stole during the pandemic. On average, low-income households have $ 3,000 in their savings and checking accounts, nearly double what they had in early 2019, according to internal Bank of America data. This has provided consumers with a cushion, even as they pay more at the gas pump and grocery store, Zhou said.
Many customers are not only spending money, but are finding themselves more and more willing to indulge themselves, both on a high-end pair. Levi‘s jeans or a first class seat on a Delta Airlines flight.
Apple on Thursday reported a “record upgrade level” during the first three months of the year, when users opted for its more premium iPhones, but warned of the impact of the locks in China. And as automakers raise prices to reflect limited inventory due to global supply chain problems, car hunters don’t panic.
ford CFO John Lawler said this week that despite rising prices, the company is still seeing exceptionally strong demand for its new products, ranging from the small Maverick pickup, which starts at around $ 20,000, to the Mustang electric crossover. Mach-E, which with higher set-ups can cost well over $ 60,000. It is already sold out for model year 2022.
United, delta Other Southwestern Airlines I am predict 2022 profits thanks to the seemingly insatiable demand from customers after two brutal years of pandemic, for both leisure and business travel. Their manning constraints are holding them back even more from flying.
Round-trip domestic airfare to the United States for travel between Memorial Day and Labor Day averaged $ 526, up more than 21% from 2019, according to data from Airlines travel agencies. Reporting Corp ..
Travelers walk through Terminal A at Orlando International Airport on Christmas Day, Saturday, December 25, 2021.
Stephen M. Dowell | Orlando’s Sentinel | Getty Images
Last month, Levi Strauss & Co. chief executive Chip Bergh told CNBC that despite rising prices, consumers weren’t going down to cheaper denim. Levi reaffirmed its outlook for fiscal year 2022, which predicts revenue growth of between 11% and 13% over the previous year.
But signs are emerging that consumer appetite may be approaching the limit.
According to Adobe Analytics, U.S. domestic airline bookings in the first two weeks of April were down 2% from the previous two weeks, the first decline in such a period this year. In March, bookings increased 12% compared to 2019, but customer spend on those tickets increased by 28%.
Restaurant traffic in March fell 1.7%, according to industry tracker Black Box Intelligence. Fine dining, casual upscale and family-friendly restaurants have seen the biggest leap forward in sales growth, but segments are still trying to recover from pandemic lows.
Jodi Klobus, a 58-year-old mother of three and grandmother of four who lives outside Albany, NY, told CNBC that she and her husband, a retired NYPD officer, used to dine out twice a week. Now that their meals, and everything else, cost more, they’ve shrunk to twice a month.
“I can hear it in the notebook,” Klobus said.
And there are other looming risks that could hold back consumer spending, even if the impact isn’t immediate. The rents are marching higher and property taxes have not been fully met household values skyrocketing.
In the fourth quarter, U.S. credit card balances increased by $ 52 billion, the largest quarterly jump in 22 years since the New York Fed data, but are still down $ 71 billion from the end of 2019.
U.S. credit card default rates climbed to 1.62% from a three-decade low of 1.48% in the second quarter of last year, still far from the 6.6% peak in the first quarter. of 2009, the end of the Great Recession, according to the St. Louis Fed.
“For this year, consumer spending is expected to remain resilient,” said Zhou, the Bank of America economist. “For next year, it’s a little less certain – and certainly towards the second half of next year, that’s when the risk of a further slowdown in consumption can arise.”
Boeing CEO Dave Calhoun on Wednesday said airline demand for new planes is picking up thanks to a resurgence in travel demand. Yet it is unclear whether Americans will continue to spend money on travel in the coming months or if they will reach a point where they will cut back.
“That second year, when inflation starts weighing on consumers’ pockets, that’s when those numbers really start to interest us,” Calhoun said in an interview with CNBC’s “Squawk on the Street.”
For now, many consumers, such as Cindy Maher, a 58-year-old who owns a leadership development consultancy and lives in Bloomfield, Connecticut, feel comfortable enough to stick with their spending habits.
“I’m not cutting,” he said. “I’m only complaining about the prices.”
Maher said he noticed nearly $ 7 loaves of bread and that it costs $ 70 to fill his car’s tank. But she said that in her two-income family, she can absorb those costs.
“My heart goes out to those in low paid jobs,” he said.