After two years of spending heavily on vacations and other experiences taken away from them during pandemic lockdowns, Americans may be on the verge of a retreat — a cooling that could help slow inflation.
The country witnessed two years of red-hot “revenge spending,” the name economists and business leaders gave to a spike in recreational spending and vacation spending that followed the coronavirus lockdowns. As demand increased, so did prices for airline tickets, hotels, and other sought-after services.
But many of those price points are now cooling. Hotel prices have recently risen much more slowly on a year-on-year basis and airfares fell in May, a report found on Tuesday. If that trend continues this summer, it could contribute to a continued slowdown in general services inflation, something the Fed has been waiting and waiting for.
“We are seeing some slowdown in so-called revenge categories,” said Yelena Shulyatyeva, senior US economist at BNP Paribas ahead of the new inflation data.
Omair Sharif, founder of the Inflation Insights firm, said ahead of the report that he expects airfare and hotel costs to depress inflation in June and July. He doesn’t expect hotels and domestic air travel to see the same increase this summer as last year.
“We just don’t get the same kind of pop anymore,” he said. “Air fares have virtually come to a standstill.”
Not only are consumers returning to more normal living patterns, they may also become increasingly cautious as they face high costs after several years of rapid inflation – and fear that the Fed’s rate hikes could soon push the economy into recession Push.
