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Originally Posted On: https://www.empower.com/the-currency/money/one-thing-2024-june-28
One thing: The vacation economy
One thing you need to know about market movers and shakers, plus a handful of headlines.
One thing moving markets
… is the soaring vacation economy as Americans pack their bags for 2024 travel. But are consumers stretching their budgets to satisfy that travel itch?
The wanderlust wave
Several signs point to a resurgence in travel this year as Americans are eager to take off despite higher prices – in fact, this summer is expected to see the most fliers ever on U.S. airlines.1 The Transportation Security Administration reported a record number of daily travelers earlier this week (2.9 million passengers in a single day) and AAA expects that trend to continue: A record 71 million travelers are predicted to set sail for the 4th of July holiday.2,3 But it certainly doesn’t stop there.
The latest survey from The Conference Board showed that the number of consumers planning a vacation over the next six months continued to rise in June. Empower research echoes that expectation, with 90% of Americans planning domestic travel this year and 37% planning international journeys.4
Confidence contradiction
This rise in travel plans and willingness to spend seems at odds with current persistent inflation and elevated borrowing costs. The Conference Board’s survey highlighted a greater appetite for travel, while also notching its fifth consecutive reading below 80 for the near-term economic outlook. A lower score usually indicates a recession is on the horizon, which usually triggers a decline in discretionary spending — like travel. The mixed signals may be a case of consumers prioritizing spending that makes them happiest. Indeed, the average American is spending almost two and half hours a day “Dreamscrolling” about things they want to one day buy or own – with vacations being a top of mind for 25%.
It’s not only travel plans and consumer confidence going their separate ways — this year has also seen a sharp divide among generations.
Empower research shows that 52% of Baby Boomers prefer budget-friendly travel options, while 20% of Millennials are postponing major purchases like homes to fund their travel plans.
Splurge vs savings
How are Americans balancing their wanderlust with their wallets? Those willing to spend this summer are financing their travels with side jobs (45%), tax refunds or bonuses (34%), and loyalty programs (32%). Though with nearly 1 in 10 jetsetters reporting they have taken on debt averaging $2,849 to reach their desired destination, this could explain some of the divide between consumer confidence and travel plans.
Part of the expected increase in travel demand can also be attributed to a decline in airfares. According to May’s Consumer Price Index (CPI), airline tickets fell 5.9% year-over-year.5
Still, vacationing will put a dent in your dollars whether you’re home or abroad: Americans anticipate spending $1,163 to travel domestically and $2,904 travel internationally this summer; Plus, Empower Personal DashboardTM data shows Americans spent $1,263 on average, for travel in May 2024.
For many Americans, travel costs aren’t budget-friendly right now. But for many others, the desire to travel is simply stronger than the desire to cut back on spending.
And a few top headlines
Amazon’s stock pushed to a new record high, bringing its market capitalization above $2 trillion for the first time.6
- This milestone adds Amazon to a short list of multi-trillion-dollar companies including Microsoft, Apple, Nvidia, and Alphabet, partly fueled by its ongoing push into AI.
Student loan borrowers have until June 30 to apply for loan consolidation, potentially leading to faster or immediate debt forgiveness under a temporary policy.7
- Under this policy, borrowers who consolidate multiple loans will receive credit based on the longest-held loan and for previously uncounted periods, accelerating their path to debt forgiveness.
Target is partnering with Shopify to allow its merchants to sell their products on Target’s website and in its stores.8
- Target is working to expand its third-party marketplace to increase its offerings and better compete with Amazon and Walmart, which have some 2 million and 135,000 sellers, respectively.
The Governor of New York announced a $150 million investment in statewide swimming to build municipal pools and natural waterways.9
- New York city and state are also investing $16 million in a floating pool in the East River to offset limited safe and healthy beach access.
What to be on the lookout for next week
Federal Reserve Chairman Jerome Powell will deliver a speech on Tuesday, July 2nd.
Speeches from the Fed Chair outside of interest rate decisions are fairly rare and this one comes at a critical time, just one month away from a potential first interest rate cut anticipated in September.
On the Friday before the speech, the Fed’s preferred inflation measure – Core Personal Consumption Expenditures Index – will also be released, giving Powell and markets more critical data to digest and reference. If this measure and other data leading up to the speech are positive, Powell’s words could build more confidence around the future path of interest rates.
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- Airline Weekly, “U.S. Airlines Forecast Record Summer Despite Air Traffic Controller Shortage,” May 2024.
- TSA, “TSA checkpoint travel numbers (current year versus prior year/same weekday),” June 2024.
- AAA, “Nearly 71 Million People Expected to Travel over July 4th Week,” June 2024.
- Empower, “Americans’ top travel destinations and spending habits,” June 2024.
- BLS, “Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category,” June 2024.
- Forbes, “Amazon Is A $2 Trillion Company For First Time Ever,” June 2024.
- CNBC, “Student loan forgiveness deadline is June 30. Here’s what borrowers need to know,” June 2024.
- Axios, “Target taps Shopify to juice its Amazon-like platform,” June 2024.
- Fast Company, “Why NYC’s floating pool could change beach access for the entire state,” June 2024.
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