Yahoo Finance Inflation: Consumers are spending more dollars, but buying 'fewer goods and services,' says economist
Americans spending more on services and less on goods is a shift that may be showing signs of tapering off, says one economist.
“The relative shift in spend is a story from 2022,” economist Greg Daco of EY-Parthenon told Yahoo Finance Live.
“We’re really at the tail end of that shift in spending. The narrative that people are going out to restaurants and traveling more, really the bulk of that took place over the past 12 months.”
Daco argues consumers are “still spending more dollars because things cost more, but they’re buying fewer goods and services.”
April’s retail sales increased 0.4% compared to the prior month. The data captures mostly sales of goods, though restaurant dining, which rose .6%, is also included. The figures are not adjusted for inflation.
“Adjusted for inflation, it’s a very small month over month increase, even in the services sector,” said Daco.
The latest Bank of America total card spend data for April points to a flattening of service related expenses. Lodging fell more than 3% compared to last year while spending at airlines dropped 4.5% compared to the prior month.
Short term rental app Airbnb (ABNB) recently said it expects bookings and average daily rates to decline in the current quarter versus a robust comp last year — when travelers booked stays away from home amid the Omicron variant.
"The lowest price listings have the highest occupancy," CEO Brian Chesky said during the company's earnings call. "So yes, people do want low price listings."
Airline demand is expected to show strength despite higher costs as the US enters the busy summer months.
In April, United Airlines (UAL) reiterated its full-year guidance indicating “demand remains strong, especially internationally, where we are growing at twice the domestic rate.”
“I'd be very curious to see how strong this travel season is going to be, in a context where prices remain quite high,” said Daco of EY-Parthenon.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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