Economic Anxiety Isn’t Stopping Anyone’s Vacation Plans

We’re not sure if Americans are vacationing to escape the stress of budgeting, or if they’re stressed about budgeting because of the cost of vacations.

Either way, Americans continue to take vacations. According to Conference Board survey data released Tuesday, roughly half of US consumers surveyed in August said they’re planning a trip in the next six months — the highest mark of the year. It’s just another reminder: There’s no recession in the world of luxury.

The 2023 Experience

Despite a nearly 50-year low unemployment rate, positive momentum on lowering inflation, and wage gains surpassing that inflation, economic sentiment remains less than sunny. In the Conference Board’s monthly consumer sentiment report Tuesday, consumer confidence dropped further than most consensus expectations — and mostly erased all the gains that led to a two-year high in July. Inflation may be falling, but prices remain elevated, and rising interest rates have contributed to an increasingly tough-to-crack housing market.

But sentiment means diddly squat compared to actual spending — even if it’s increasingly going toward experiences over goods. Experiences like, say, a trip to the Amalfi Coast:

• In addition to nearly half of consumers expecting to travel in the next half-year, roughly 20% of consumers say their trips will be abroad. That’s the highest share ever, according to data going back to the 1970s.
• That dovetails with two major industries tied to tourism — airlines and hotels — which have both largely rebounded from pandemic lulls. A Reuters analysis published earlier this summer of key hotel metrics in 15 major metro US areas shows the industry has almost entirely recovered, while airlines have expanded international routes to keep pace with US demand — driven in part by a strong dollar.

Credit Check: While shoppers are likely spending slightly less on goods because they’ve already bought all the goods they need, a wave of retail chains have recently warned that consumers are increasingly turning to credit cards for purchases — a sign that pandemic piggy banks are close to empty. That shift couldn’t have come at a worse time, given that rising interest rates have tightened the credit market.

And it’s likely fueling the rise in travel. “Consumers have shifted their spending toward experiences, which are easier to finance with credit cards,” wrote Bloomberg Economics’ Eliza Winger in a note Tuesday. “We expect consumer spending to run out of steam ahead, reflecting deflating confidence about future job availability and incomes.” Stressed yet? Our advice: Get to a beach as fast as possible, and let all your troubles wash away.