A woman pushes a shopping cart through the grocery aisle at Target on May 16, 2022 in Annapolis, Maryland, as Americans prepare for sticker shock in the summer as inflation continues to rise.
Jim Watson | AFP | Getty Images
People still appear ready to travel, go to the movies and have a drink or two, even as rising prices and fear of a recession have drawn them back to other sectors.
How people spend their money is changing as the economy slows and inflation drives up prices everywhere, including at gas stations, grocery stores and luxury retail stores. For example, the housing market is already feeling the pinch. Other industries have long been considered recession proof and may even enjoy a bump as people start moving out again after hunkering down during the pandemic.
Yet, buyers everywhere are feeling the pressure. In May, an inflation metric that tracks prices on a wide range of goods and services jumped 8.6% from a year earlier, the biggest jump since 1981., Consumer optimism about their finances and the sentiment of the overall economy fell to 50.2% in June, its lowest level, according to the University of Michigan’s monthly index.
As gas and food prices climb, Brigitte Engler, an artist based in New York City, said she’s driving to her second home less often and eating out less.
“Twenty dollars for lunch at this point seems extraordinary,” she said.
Here’s a look at how different sectors are faring in the slowing economy.
Music, movies, travel and other experiences that people missed during the height of the pandemic are enjoying strong demand across industries.
live nation EntertainmentAt the William Blair Growth Stock conference earlier this month, CEO Joe Berchtold, which owns Concert Venues and Ticketmaster, has yet to see public interest in attending concerts.
In movie theaters, blockbusters like “Jurassic World: Dominion” And “Top Gun: Maverick” has also done strong sales at the box office. The film industry has long been considered “recession proof,” as people who give up on pricier holidays or recurring Netflix subscriptions can often buy movie tickets to survive a few hours.
Alcohol is another category that is generally protected from an economic downturn, and people are again going out to bars after drinking more at home in the early days of the pandemic. As winemakers, brewers and brewers raise prices, companies are betting that people are willing to pay more for better quality wine.
“Consumers continue to trade, not down,” Molson Coors Beverages CEO Gavin Hattersley said on the company’s earnings call in early May. This may seem counterintuitive, but he said the trend is in line with the recent economic slowdown.
The sale of liquor has also been partially shielded as prices are not rising as fast as the prices of other goods. In May, alcohol prices rose nearly 4% from a year earlier, while the overall consumer price index jumped 8.6%.
big airlines like delta, American And United are also predicting return to profitability Thanks for the increase in travel demand. Consumers have largely digested the higher fares, allowing airlines to cover rising costs of fuel and other expenses, however. domestic bookings down in the last two months.
It is unclear whether the race will continue back into the skies after the spring and summer travels. Business travel is usually in decline, but airlines can’t count on that as some companies look for ways to curb expenses and even announce layoffs.
People’s desire to get out and socialize again is fueling products like lipsticks and heels that were kept away during the pandemic. This recently helped sales including retailers Messi’s And upside down beautyWhich boosted their full-year profit forecast last month.
Luxury brands such as Chanel and Gucci are also proving to be more resilient, with wealthier Americans unaffected by price hikes in recent months. His challenges have in recent days been more concentrated in China, where pandemic restrictions remain in place.
But the fear is that this dynamic could change rapidly, and these retailers’ short-term gains could be lost. According to a survey by consumer research firm NPD Group, more than eight out of 10 consumers plan to make changes to reduce their spending over the next three to six months.
“There’s a tug of war between a consumer’s willingness to buy what they want and the need to make concessions based on the high prices they put on their wallets,” said Marshall Cohen, NPD’s chief retail industry advisor.
Emerging Rate of interest Pledges have reduced demand, which is now almost half of what it was a year ago. After falling for six consecutive months, homebuilder sentiment has fallen to its lowest level in two years. real estate firm redfin and Compass both announced layoffs earlier this week.
“As May demand is 17% lower than expected, we don’t have enough work for our agents and support staff,” Redfin CEO Glenn Kellman later wrote in an email to employees posted on the company’s website.
For the retail sector more broadly, Commerce Department data also showed an astonishing 0.3% decline in May compared to the previous month. This includes a decline in online retailers and miscellaneous store retailers such as florists and office suppliers.
And while demand for new and used cars remains strong, auto industry executives are beginning to see signs of potential trouble. Car and other automotive dealers saw sales decline 4% in May compared to the previous month, with double-digit growth in the cost of new and used vehicles over the past year, according to the US Department of Commerce.
Wade Motor CFO John Lawler said this week that delinquencies on car loans are also starting to tick up. While the increase may indicate tough times ahead, he said it was not a cause for concern right now, as crimes were low.
“It looks like we’re going back to the mean,” Lawler told a Deutsche Bank conference.
The restaurant industry is also seeing signs of potential trouble, although how eateries are affected can vary.
Fast-food chains have also traditionally outperformed in economic downturns because they are more affordable and attract diners with promotional deals. Some restaurant companies are also betting that as long as grocery prices rise sharply, people will continue to eat out.
According to the Bureau of Labor Statistics, the cost of meals away from home rose 7.4% in the 12 months ended May, but food prices at home rose even more rapidly, an 11.9% increase. Restaurant Brands International CEO Jose Sil and Wendy’s CEO Todd Penegore are among fast-food executives who have emphasized difference as a benefit to the industry.
but McDonald’s CEO Chris Kempczynski said in early May that low-income consumers have begun ordering cheaper items or shrinking their order sizes. As the largest American restaurant chain by sales, it is often seen as a bellwether for the industry.
On top of that, traffic in the broader restaurant industry slowed in the first week of June to its lowest point of the year, according to market research firm Black Box Intelligence. The number of visits also slowed down in May, although sales increased by 0.7% at higher spend per visit.
Barclays analyst Jeffrey Bernstein also said in a research note Friday that restaurants are ramping up discounts, a sign they expect same-store sales growth to slow. Chains offering new deals to attract diners include Domino’s Pizzawho is offering half price pizza, and WendyWho brought back his $5 biggie bag of food.
Large-scale merchant retailers such as Target and Walmart have issued cautious guidance for the coming year to adjust to changes in shopper behavior.
Target investors warned earlier this month that its fiscal second-quarter profits would be hit as it exempts those bought during the pandemic but no longer wanted such as small appliances and electronics. The big-box retailer is now trying to carve out space on its shelves for products in demand: beauty products, home essentials, and back-to-school supplies.
CEO Brian Cornell told CNBC that the company’s stores and website are still seeing strong traffic and “a very resilient customer,” despite changes in their buying preferences. Rival walmart It is also offering discounts on less wanted items like apparel, though the retail giant said It’s Gaining a Share in the Grocery As buyers want to save.
— Leslie Joseph, Lauren Thomas, Michael Welland, John Rosevier, Sarah Whitten and Melissa Repko contributed reporting.