If you’re planning to fly to your summer vacation spot this year, plan for a crowded plane.
Data from MasterCard SpendingPulse show sales of airline tickets in the U.S. rose by 4.6% through the first three months of the year, more than twice the growth in overall retail sales. Airline bookings in April may come in even higher.
That’s not a gargantuan spike, but at a time when the middle class is supposedly morose, it’s an encouraging sign of ordinary people spending a few extra bucks to enjoy themselves. “So far, 2014 is looking like the best year since the recession ended,” says Sarah Quinlan, a senior vice president at MasterCard Advisors. “This is consumers saying, ‘I’m confident.’”
In other ways, consumers are expressing doubts. Consumer sentiment surveys have been ticking up, to the highest levels since 2008, but they’re still below levels that typically indicate a healthy economy. At the beginning of 2008, 48% of Americans said it was a good time to find a job, according to Gallup. Only 30% say that now. The unemployment rate is still at an elevated 6.7% and roughly 4 million Americans have been out of work for six months or more.
But any sign of progress is welcome, and plans for summer vacation travel could signal a psychological turning point for the Main Street economy. Last summer was a good year for vacations, but most Americans took driving trips, according to SpendingPulse. Flying vacations are important because the typical family spends twice as much on a trip when they get there by plane instead of car. Air travelers tend to spend more on hotels, excursions, restaurants and souvenirs than road trippers.
A spike in airline bookings is typically followed a couple months later by a surge in hotel revenue, since people who buy tickets are often committing to a trip that will require lodging. MasterCard saw that pattern during the past few months, when there was a modest uptick in airfare purchases in December, followed by a rise in hotel spending in February (probably on account of school winter breaks). Since only about one-fourth of adult Americans hold a passport, the rise in bookings means more of them will be traveling and spending money in their home country.
Some data suggest wealthy Americans are doing most of the spending these days, while the middle class hoards whatever cash it has. But Quinlan says spending patterns have been different so far in 2014. “The high end is not really spending right now,” she says. “They’re worried about the stock market.” For those keeping score, the S&P 500 stock index soared by 29% in 2013 but has risen just 1% in 2014. Many analysts are predicting a pullback of 10% or even 20% before stocks resume their upward climb.
Still, an increase in travel spending may not reflect the same sort of overall economic boom it once did. Retail analysts say pinched consumers are more willing to spend on “experiential” things such as trips and restaurant meals, but less willing to spend on many categories of consumer goods. So far this year, for instance, spending on clothes, hardware and furniture is down year over year, according to SpendingPulse. So summer travelers may be wearing old clothes on their upcoming trips. Maybe next summer, they’ll upgrade their wardrobes.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
- Personal Finance - Career & Education
- Banking & Budgeting
- summer vacation
- airline tickets