Inflation and recession fears are squeezing some industries more than others

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As inflation increases, a woman pulls her shopping cart along the Annapolis Target grocery aisle on May 16th, 2022. Americans are now in shock.
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Even though prices are rising and people fearing a recession, they still seem willing to spend money on travel and go to movies, and to have a few drinks,

The economy is slowing and inflation pushing prices higher all around, including at gas stations, luxury retail shops and grocery stores. For example, the housing market is already suffering from rising prices. Some industries were long considered stable and are now seeing a rebound as more people go out after being cooped up during the crisis.

However, many shoppers are experiencing pressure. The largest increase since 1981 was recorded by an inflation measure that monitors prices across a range of goods. It rose 8.6% in May.. According to University of Michigan’s monthly index, consumer optimism regarding their finances and overall economic sentiment dropped to 50.2% during June. This is the lowest level ever recorded.

Brigette Engler is an artist living in New York City. She said that as gas prices rise, she will be driving less to New York City and eating out less.

She stated, “Twenty dollar seems excessive at this point in time for lunch.”

This is a snapshot of how the different industries are doing in the slowing economy.

Films, movies and experiences that are holding up

There is strong demand for entertainment, films, travel, and other activities that people were unable to enjoy during the peak of the pandemic.

Live Nation EntertainmentCEO Joe Berchtold stated that Ticketmaster and Concert Venues have not seen concert-goers’ interest wane at this point, speaking to the William Blair Growth Stock Conference.

Blockbuster movies like “The Godfather” are shown in movie theatres.Jurassic World: Dominion” und “Top Gun: MaverickThey also achieved strong box office results. Since people can afford to give up on expensive vacations and recurring Netflix subscriptions, the movie industry has been “recession-proof” for many years.

The other category generally shielded from economic downturns are alcohol. After drinking more during the initial days of the pandemic, people go back to bars. Even though brewers and distillers raise alcohol prices, businesses are betting people will be willing to spend more on higher quality alcohol.

“Consumers continue trading up, not down,” Molson Coors BeverageGavin Hattersley, CEO of the company, spoke on May’s earnings conference. This may seem contradictory, but Hattersley stated that it is consistent with current economic downturns.

Because prices haven’t been increasing as rapidly as those for other goods, sales of alcohol have been shielded. Alcohol prices rose by roughly 4% in May over a year, while the general consumer price index jumped 8.6%.

Big airlines like Delta, American UnitedForecasting is also a possibility. return to profitability thanks to a surge in travel demand. The rise in travel demand has led to consumers absorbing higher fares. This helps airlines offset the rising cost of fuel. domestic bookings have dippedIn the past two months.

The future of the sky race is uncertain after summer and spring travel rushes. The fall is usually a good time for business travel, although airlines may not be able count on it as many companies are looking to cut costs and announce layoffs.

Products like lipstick and high-heeled shoes that were lost during the pandemic are now being rediscovered by people who want to be social again. Retailers have seen an increase in sales as a result. Macy’s Ulta BeautyThe company’s full-year profit projections were boosted by, last month.

Gucci and Chanel, luxury brands like Chanel, are showing resilience. In fact, Americans who have more money are not affected as much by rising prices. These problems have been concentrated in China, which is still under pandemic restriction.

However, this dynamic is at risk of changing quickly and retailers could lose their short-term gains. According to NPD Group’s consumer research company, more than 8 out 10 Americans plan to cut back their spending over the next 3 to 6 months.

Marshal Cohen, NPD’s chief retail advisor said “There is a tug of war between the consumer’s desire to get what they want and their need to make concessions based upon the higher prices hitting them wallets.”

Homes, big-ticket items squeezed

Housing, once a hot market, is clearly suffering from the slowdown.

Steady Rising interest ratesThis has slowed mortgage demand by roughly half compared to a year ago. After falling six months consecutively, homebuilder sentiment dropped to its lowest point in 2 years. Real estate firms RedfinBoth Compass and Compass announced layoffs this week.

Redfin CEO Glenn Kelman said in an email sent to employees that May’s demand was 17% less than expected. The message, which is later made public on the company’s site by Redfin’s website, stated:         

The Commerce Department data showed that overall retail sales dropped by 0.3% in May compared to the prior month. It included drops at both online and non-store retailers, such as florists or office suppliers.

Even though demand is still strong for both new and used vehicles, some auto executives see potential problems. The cost of used and new vehicles has risen by more than double the amount in the past year. According to U.S. Department of Commerce data, May saw a 4% drop in sales for car and motor vehicle dealers.

Ford MotorJohn Lawler, CFO, stated this week that car loan delinquencies are increasing. The increase in delinquencies could be a sign of trouble, but he stated that it was not yet too worrying, given the low levels.

Lawler, speaking at the Deutsche Bank Conference said that “it seems like we are reverting more towards the means.”

Restaurant industry also shows signs of trouble. However, the exact impact on eateries could differ.

Because they are more accessible and offer discounts, fast-food restaurants have traditionally performed better during economic downturns. Restaurant companies also believe that people will continue to eat out even if grocery prices go up faster.

In May 2012, food costs abroad increased 7.4%, while prices in home food rose 11.9% according to Bureau of Labor Statistics. Restaurant Brands InternationalFast-food CEO Jose Cil, and Wendy’s CEO Todd Penegor have highlighted the importance of the sector’s gap.

However McDonald’sChris Kempczinski CEO stated that in the early months of May, low-income people have been ordering less expensive items and reducing their order sizes. It’s the U.S.’s largest restaurant chain in terms of sales and is often a beacon for the sector.

According to Black Box Intelligence, the traffic in general to restaurants slowed down to the lowest point for the year during the first week. Although visits to restaurants slowed slightly in May, they saw an increase of 0.7% in sales due to increased spending.

Jeffrey Bernstein from Barclays also stated in Friday’s research that discounts are increasing at restaurants, which is a signal that they expect slower same-store growth. The following chains have offered new discounts to attract diners: Domino’s PizzaHalf-price Pizzas available from. Wendy’sThe $5 Biggie Bag dinner was brought back by.

Target and Walmart are two examples of mass-merchant retail outlets that have been struggling to adapt to shifting shopper behaviour. They also issued cautionary guidance for next year.

Target warned investorsIt was announced earlier in the month that it would lose its fiscal second quarter profits due to discounts on items people purchased during the pandemic, but have since stopped using. This big-box retailer wants to stock the most in-demand products now. These include beauty products, household supplies and back-to school supplies.

CNBC’s CEO Brian Cornell stated that his company’s websites and stores are seeing good traffic despite changing customer preferences. Rival WalmartThe retail giant also said that it has been offering discounts on less-desired products like apparel. it’s been gaining share in groceryShoppers are looking to save.

— Leslie Josephs, Lauren Thomas, Michael Wayland, John Rosevear, Sarah Whitten and Melissa Repko contributed reporting.

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