Consumer Travel Spending: Is it Slowing Down?

BofA Notes a New Trend as Travel Companies Report Missed Earnings

A Recurring Theme: Warnings about Low-Income Consumers

This earnings season has seen an uptick in companies cautioning about the struggles of low-income consumers. Executives from McDonald's, Starbucks, and Tyson Foods, during their earnings calls, have highlighted the growing challenges faced by the working poor. Starbucks CEO Laxman Narasimhan, during a call with investors last Tuesday, expressed disappointment with the company's quarterly performance. He attributed the unsatisfactory results to a "cautious consumer" and significant headwinds. Likewise, McDonald's executives reported lower-than-expected quarterly sales growth last week. Melanie Boulden, who heads Tyson's Prepared Foods business, warned on Monday that "The consumer is under pressure, especially the lower-income households."

Credit Card Data and the Consumer Pressure

Further evidence of consumer pressure came on Wednesday when Federal Reserve's credit card data showed a significant slowdown in credit card debt growth in March, marking the smallest monthly increase since the Covid crash.

Consumer-Sensitive Stocks: A Look at the Travel Industry

Bank of America's trading desk also noted some weakness in consumer-sensitive stocks, particularly in the travel industry. Their analysts questioned, "Theme Alert? Consumer Travel Spending easing?" They highlighted a series of disappointing earnings across the travel industry, including misses from Expedia, Tripadvisor, Comcast's parks commentary, Disney's parks moderation or normalization, and Uber's slight bookings miss. Tripadvisor, in particular, saw its worst intraday decline ever, with its stock plunging by as much as 38%. This was triggered by the company's announcement that a deal to sell the company had been called off.

Gen-Z and Millennials: Can they Afford their Stimmy-Funded Experiences?

The question arises: Did the absence of a 'deal premium' suddenly expose investors to the reality that Gen-Z and millennials can no longer afford their stimulus-funded "experiences" amidst a slowing economy?

A Closer Look at the Market

On a deeper examination of the markets, the Dow Jones US Travel & Leisure Index peaked in late March and fell 7.5%, facing heavy resistance. However, the Transportation Security Administration's airport checkpoint data still shows robust travel demand. Bank of America's trading desk might be onto a new trend that other companies are also starting to observe: low-income consumers are feeling the pinch in the era of failed Bidenomics.

Final Thoughts

This article presents a thought-provoking look at the current state of consumer spending, particularly in the travel industry. It raises questions about the economic pressures faced by low-income households and the potential impact on the broader economy. What are your thoughts on this matter? Share this article with your friends and start a conversation. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.