Spoiler alert: This is going to feel a bit like a Part 2 from my last column.
New data from the U.S. Department Commerce shows that consumer spending was flat in July compared to June, when it grew by 0.4%, CNN reports. The Personal Consumption Expenditure price index for July increased by 0.2% from June and at an annual rate of 3.7%.
Pulling out volatile energy and food prices has the core PCE index increasing by 0.2% on a month-to-month basis and at a 3.3% annual rate. Doesn't seem that much better, and besides, consumers still had to pay those prices.
People gotta eat and get around, after all.
CNN reports that consumer spending overall has been resilient despite all the economic disruptions they've faced, but there may be a limit.
"With tax refunds drying up and inflation outpacing wage growth for a couple of months now, those gains could slip the back half of the year," according to the article.
I'm going to ask you to remember Tourism Economics President Adam Sacks' presentation at HDC just a few short weeks ago. He said that consumer spending has outpaced the rate of growth of income, and with Americans drawing down on their savings, they would likely pull back on spending.
“You're almost certainly going to see consumers need to replenish those savings,” he said. “It's an unsustainable drawdown, given what we're seeing in inflation relative to income and what we're seeing in terms of spending relative to earnings.”
So, just a few weeks out, we may be seeing the start of this prediction coming true.
Not much you can do at the moment other than strike while the iron is hot, making the most of the travel demand as it stands now to build up any amount of buffer against potential future weakness among the leisure segment.
You can reach me at bwroten@hotelnewsnow.com as well as on LinkedIn.
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