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Trend Watch: Spending On Memories Over Merchandise

July 2, 2024 | Corinne Casagrande

Originally posted on MediaPost

Janet Yellen just told us she goes to the grocery store every week and “isn’t shocked” by the prices. The backlash the Treasury Secretary (worth an estimated $20 million) got taught was what marketers already know: While prices are no longer jumping month-over-month, consumers still don’t like looking at bigger price tags on items they buy a lot. If consumers have a baseline price in their minds, expect attrition if you raise it.

Facing food prices 26% higher and gas prices up 38% since 2019, people have been bargain-hunting. Shoppers are loving coupons and private labels, buying cheaper stuff whenever possible. After all, this isn’t 2021; no one wants to spend on stuff, they want to spend on experiences. Services continue to drive the most spending growth, just as they have over the last three years. People put more of a premium on experiences. The value of a memory (or Instagram story?) is outpacing even inflation.

Average prices are up 22.7% since May 2019. The cost of most experiences people buy have increased close to that amount without a damper on demand. Cruise lines are having a particularly big year — Norwegian and Carnival boasted record bookings with bullish calls on future demand. Restaurants, car rentals, hotel rooms, movies, theatres and concerts are all going strong.  People are buying plenty of plane tickets this summer, and surprisingly, they’re getting a bargain. Airfare is down -0.8% in May compared to May 2019.

High income households ($100K+) are the force behind rising services spending, fueling travel and entertainment purchases. As homeowners, a disproportionate amount of their spending growth has been plunked down to keep up with rising housing costs. While lower income renters have seen a reprieve, housing accounts for more than half of high-income household spending, according to Morning Consult.  If housing costs continue to rise, high earners could pull back on their experiential spend.

But it’s not just Yellen who feels good about inflation cooling this summer. Fed officials predicted one rate cut this year, and investors are acting like they think it may come in September. If interest rates come down, pressure is further eased on credit card debt, car loans and mortgages, freeing up cash for more trips and nights out on the town –though reports from the retail front lines indicate consumers are still likely to pack store-brand sunscreen.