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No Recession in Discretionary Spending

Consumers aren’t hunkering down despite higher costs

Nobody has to go to a restaurant. It’s a choice. When times are tough and you need to be more cautious with spending, going to restaurants is a simple thing to cut out of your budget. 

Lately the rising costs of nearly everything has investors concerned that a recession may be around the corner. But the most recent US retail sales report shows discretionary spending, like in restaurants and bars, has never been stronger.

 

U.S. Monthly Sales at Restaurants and Bars, in Billions of Dollars 

This isn’t what a recession looks like. And after two years of COVID-19 changing people’s priorities, it’s clear that going out to eat is the kind of thing that people value. There’s some serious pent-up demand for it. 

Online shopping is another kind of spending that’s easy to cut out. But despite the economy reopening and millions of people rediscovering restaurants, brick & mortar stores and hotels—online shopping continues to be at levels well above the 2019 Holiday Season.


U.S. Monthly Sales at Online Stores, in Billions of Dollars 

Amazon’s revenues confirm the stats from the broader online shopping industry. The company has posted 8 consecutive quarters that have been larger than the 2019 Holiday quarter (8 Christmases in a row!).

High energy costs certainly don’t help anyone’s budget. But that makes these discretionary spending figures all the more impressive. In aggregate, consumers are in a position to prioritize spending on things they enjoy—and the most recent data shows they are doing just that. 

Best regards,

Evan McGoff

Disclosure: Dock Street Asset Management, Inc. and our clients own Amazon (AMZN). This article is not intended to be used as investment advice.


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