Main Street Macro: Staycation, road trip, or none of the above?

Memorial Day marks the unofficial start of the summer vacation season in the United States, but with consumers looking downbeat recently, the question is whether they’ll be hitting the road in force like they did last year.

How people spend their time off this year–be it binge-watching Netflix from the couch or flying to Hawaii–can tell us a lot about how the economy will perform in 2024.

Spending pullback

Last week, we received a sign that consumers might be pulling back on spending. Retail sales flatlined in April, a big downshift from the 1 percent monthly gain shown in March and evidence that consumers might be increasingly weary of faster-than-normal price increases. 

Higher gas prices meant that consumers also spent more at the pump in May. Last week, the U.S. Energy Information Administration concluded that gas prices could be higher than normal this summer because of rising refinery costs.

If gas prices stay high or continue to rise, people might put road trips on hold or opt for a shorter summer vacation.

Vacation costs

While higher gas prices might put the brakes on some summer plans, April did bring good news on inflation. Consumer prices grew more slowly than economists expected, increasing just 3.4 percent from a year ago.  Stripped of volatile energy and food items, the Consumer Price Index is up 3.6 percent from last year. That’s better than it’s been, and a bit closer to the Federal Reserve’s 2 percent target.

While consumer price growth slowed overall, gas prices jumped 2.8 percent in April from the previous year, compared to a 1.7 percent increase in March. The cost of eating food away from home, such as in restaurants, continues to march upward–it was 4.1 percent higher than a year ago. And for people looking at summer concert tours – Taylor Swift’s tour has moved on to Europe but Megan Thee Stallion and Green Day will be touring stateside this summer – recreation prices jumped 1.5 percent in April from a year ago.

There is one silver lining: The cost of hotels and other lodging away from home actually decreased. And for a real deal, look at airline tickets, which are down 5.8 percent from a year ago (hello, Hawaii!). 

Miles traveled on planes are up 5.8 percent in 2024, according to the latest data from the U.S. Department of Transportation. Vehicle miles traveled also are up modestly from last year according to the U.S. Federal Highway Administration, even with the bump in gas prices.

While driving is back to pre-pandemic levels, passenger travel on airlines, trains, and buses still lags. It’s too soon to know if this is a permanent shift in consumer behavior, but clearly the rebound in public transportation has been more prolonged.

My Take

Consumer travel acts like a thermometer on the economy. Weak travel this summer could be a predecessor to a broader economic slowdown; robust travel could indicate strong economic growth ahead.

This summer, I’d like to do a mix of staycations, road trips, and longer excursions with my husband, sons, and Lavender the dog.

Like most people, our plans will be influenced heavily by how much these experiences cost. And as members of a two-economist household, my sons understand that our vacation plans are a reflection of the state of the economy.

MainStreet Macro will be on hiatus next week, returning June 3.