Monday 20 June 2022 02:04 AM Recession fears mount as flight bookings slump by 2.3% and car sales drop 4% ... trends now
Americans have started changing their spending habits as an Obama-era economist warns a recession is inevitable.
Data shows that many have cut back on large-scale purchases, as evidenced by the 2.3 percent slump in flight bookings and the 4 percent drop in car sales.
Citizens have cited soaring costs, likely fueled by the country's skyrocketing inflation rate, as reasoning for scaling back on vacations, dining out, and routine services like haircuts, manicures and house cleaning.
Economist Larry Summers, who served as the U.S. Secretary of the Treasury under Barack Obama, has also warned that 'by the end of next year, we would be seeing a recession in the American economy.'
He argues President Joe Biden's administration needs to take action to 'reduce the inflation' and 'provide some relief' to the American consumer.
Americans have started changing their spending habits as an Obama-era economist warns a recession is inevitable. Data shows that many have cut back on large-scale purchases, as evidenced by the 2.3 percent slump in flight bookings
As ticket prices for domestic flights have nearly doubled this summer, airlines are reporting a decline in summer bookings.
The travel industry was hard-hit with a travel surge in late spring after COVID-related restrictions impacting airlines were fully lifted.
Domestic flight bookings drove $8.3 billion in May, a 6.2 percent increase from the month prior, but are now down by 2.3 percent compared to bookings made the same month in 2021, Adobe reported.
Americans are still spending 11 per cent more on flights overall than at the same time last year, an indication of just how much fares have climbed since.
Analysts allege the decline is likely a direct impact of elevated ticket prices, which DailyMail.com revealed earlier this month were more than double average cost of fares.
'We are beginning to see a more notable shift from goods to services, with consumers spending over half a billion dollars more on domestic flights in May,' Vivek Pandya, lead analyst at Adobe Digital Insights, said.
'While some consumers have been able to stomach the higher fares, especially for those who delayed travel plans during the pandemic, the dip in bookings shows that some are rethinking their appetite for getting on a plane.'
Despite the recent decline in flight bookings, reservations are still up 4.4 percent compared to pre-pandemic rates of May 2019. Overall airfare spend is up by 11 percent.
Retail sales slowed for the first time in 2022 last month. Most notably was the 4 percent drop in car sales
Although consumer spending, which makes up more than two-thirds of the U.S. economy, held strong during April but analysts predict the spend streak is coming to an end.
Retail sales slowed for the first time in 2022 last month. Most notably was the 4 percent drop in car sales.
Credit card spend data analyzed by Barclays revealed both high and low-income Americans have begun pulling back on routine spending, particularly with services.
'All through 2022, the narrative has been that as COVID faded, households would ramp up spending on services,' Barclays analysts told The Boston Globe. 'And indeed, that narrative has been true for much of this year. But . . . services spending seems to be slowing considerably.'
Spending on travel and restaurants, which had grown more than 30 percent from 2021, has now slowed to half that pace, the analysts explained.
Businesses around the country have also reported a decline in customer spending. Most consumers are cutting back on services, like haircuts or house cleaning, however overall retail spending has also decreased
Businesses around the country have also reported a decline in customer spending.
A salon in Virginia said customers who used to come in every four weeks are now going up to 12 weeks between appointments.
Other customers are opting for less pricey services, like partial hair treatments or highlights instead of all-over color.
The hair salon said overall sales have decreased by about 20 percent from last year and tips have fallen from 20 to 10 percent.
A house cleaning service in Ohio reported similar trends. Co-owner Keith Troyer told the newspaper that most customers have delayed or cancelled appointments.
He also noted that some of his regulars have tried to negotiate lower rates.
'It hasn't been a massive drop off, but enough that it's been noticeable,' Troyer said. 'Quite a few clients have called saying, 'Hey, my wife got laid off. We need to cancel,' or 'Can I switch from biweekly to monthly?' Prior to this month, that's something that hardly happened.'
Earlier this month, DailyMail.com revealed that consumers are paying more than double average ticket prices for domestic flights. The above data reflects prices for the week of June 6
Meantime, economist Larry Summers has warned against of a looming recession.
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