Americans are starting to pull back on travel and restaurants

More Americans are beginning to hold off on booking flights, getting haircuts, building backyard pools and replacing old leaky roofs - in some of the new signs that the consumer engine of U.S. economic growth could be losing steam.

Over the past several weeks, households had already cut back on big-ticket purchase because of soaring prices, but in a worrisome twist, data suggests consumers are also beginning to tap the brakes on dining out, vacation plans and even routine services like manicures, hair cuts and home-cleaning appointments. Business owners around the country say rising prices, dwindling savings and concerns of a souring economy are taking a toll on household spending decisions.

At Olentangy Maids in Columbus, Ohio, more customers are putting off or canceling home-cleaning appointments. Some regulars are trying to negotiate lower prices, while others have stopped tipping altogether, co-owner Keith Troyer said.

“It hasn’t been a massive drop off, but enough that it’s been noticeable,” Troyer said. “Quite a few clients have called saying, ‘Hey, my wife got laid off. We need to cancel,’ or ‘Can I switch from biweekly to monthly?’ Prior to this month, that’s something that hardly happened.”

Consumer spending, which makes up more than two-thirds of the U.S. economy, has held strong through April even with inflation at historic highs. But there are growing signs that the spending streak could be ending.

Retail sales slowed last month for the first time this year, driven by a 4% drop in car sales. U.S. flight bookings dipped 2.3% in May from a month earlier, according to data from Adobe Analytics. And both high- and low-income Americans have begun pulling back, particularly on services, in the past four to six weeks, according to an analysis of credit card data by Barclays. The slowdown in spending is now concentrated in services, not goods, the bank found in a new analysis of credit card data.

“All through 2022, the narrative has been that as COVID faded, households would ramp up spending on services,” Barclays analysts wrote in a note this week. “And indeed, that narrative has been true for much of this year. But . . . services spending seems to be slowing considerably.”


Spending on services like travel and restaurants, which was growing more than 30% from 2021 rates this year, has now slowed to half that pace, according to the Barclays analysis.

Customers at Salon Simis in Fairfax, Va., have begun cutting back in new ways. Clients who used to come in every four weeks are now going 12 weeks in between appointments, owner Ahmet Sim said. Others are bargaining for lower prices or opting for partial treatments instead of highlights all over. Overall sales are down 20% from a year ago. Average tips have also fallen, from about 20% to 10%.

“Just in the last month, I’ve started noticing that clients are bargaining like crazy,” Sim said. “They’ll say, ‘My bill is usually $500 for color and highlights. What can you do to reduce it?’ "

He tries to work with them, he said, by using lower-priced color lines or passing blow drying services to less-experienced stylists. But he’s feeling the pinch of inflation, too: Boxes of disposable gloves have gone from $7 to nearly $25 in two years. Hair dyes that used to cost $25 are now closer to $40. Sim raised prices during the pandemic, once, but he’s worried another markup would alienate more customers.

“People are cutting back left and right,” he said. “They’re saying, ‘I’m sorry. I can’t afford this anymore.’ "

These early signs of slowdown across a broad range of products and industries, including travel and restaurants, challenge the notion that Americans have simply shifted their spending from goods to services. The hope until now had been that after two years of stocking up on products like cars, furniture and appliances, Americans would splurge more on vacations, dining out, manicures and other services they’d mostly put off for much of the pandemic.

Meanwhile, one benchmark showed growth in the U.S. services industry slowed in May to its lowest level since February 2021, according to a closely watched index from the Institute for Supply Management.

“The goods side [of spending] is definitely weakening, but if you look closely, services are, too,” said Kevin Gordon, senior investment research manager at Charles Schwab. “Restaurant sales have eased, travel-related spending is weakening. The weight on the consumer is becoming too much - whether because of inflation or other factors - and that’s across income groups.”

Overall, flight searches on booking site Kayak are down an average 13% so far this month, compared with the same period in pre-pandemic 2019. Restaurant dining data from the reservation platform Open Table, meanwhile, shows that the number of people eating at restaurants fell 11% in the week ending June 16, compared with the same week in 2019.

While low-income families have been hardest-hit by inflation, higher-income households are also beginning to cut back, especially as they watch investments - from stock portfolios to homes - lose value, Gordon said. Household wealth fell for the first time in two years in the most recent quarter, in large part because of a $3 trillion plunge in the stock values, Federal Reserve data shows.

The markets continued their volatile descent this week, with three major stock indexes deepening losses for the year and the S&P 500 index closing out its worst week since March 2020.

At Posh Luxury Imports, a Los Angeles car dealership that also rents high-end vehicles, owner Omar McGee said both consumer demand and their credit scores are markedly lower than six weeks ago.

“I see more credit problems,” McGee said. “More people have maxed-out cards or have fallen behind on payments. At the end of the day, that means people have to be much more cautious about their spending.”

Credit card debt, which nosedived during the pandemic as Americans used government stimulus to pay down balances, has rebounded to all-time highs. As of June 1, Americans had $868 billion in consumer debt, up nearly 16% from last year, according to Fed data.

And while the wealthiest continue to rent Lamborghinis and Bentleys, McGee said there has been a notable decline in the number of tourists opting for high-end rentals.

“I can tell that traveling is down, the tourism is down,” he said. “A lot of higher-middle-class customers used to come into town and splurge, but you can see that dropping pretty dramatically.”

That consumer hesitation follows months of inflation at 40 year highs. Prices have risen 8.6% in the past year, driving up costs for a range of essentials, including gas, which reached a record of $5 per gallon.


The biggest bright spot in the economy remains the strong jobs market, with the unemployment rate at a pandemic low of 3.6%. Demand for workers neared record highs in April, with about twice as many openings than job seekers. Weekly claims for unemployment insurance have recently begun to creep up, but they are far lower than they had been during most of the pandemic.

With workers still able to find jobs, the Fed made a sharper move this week to hike interest rates by three-fourths of a percentage point in hopes of cooling the economy enough to curb inflation without tipping it into recession. Despite the central bank’s assurances that it can pull off a “soft landing,” businesses and households are increasingly worried about the state of the economy as well as their personal finances. Indeed, U.S. consumer sentiment plummeted this month to its lowest level on record, according to an index by the University of Michigan.

“The consumer is coming under stress,” said Douglas Duncan, chief economist at mortgage giant Fannie Mae, who expects a recession next year. “We see that in decreasing retail sales and in rising credit card usage. We don’t expect things to fall apart immediately, though. It’ll be a slower decline.”

Indeed, small businesses nationwide are reporting small signs of customers pulling back. Morehead Pools, which specializes in luxury backyard pools in Louisiana, is booked through next summer, according to chief executive Michael Moore. But in a sign that higher-income consumers may be thinking twice before splurging, new queries are down 30% so far this year.

“Once you get past $4 [per gallon of gas], everybody’s feeling it at the pump and they’re not making enough on the front end to overcome that,” Moore said in an analyst call hosted by Jefferies this week. “The cost of energy and inflation and then the cost of money . . . that’s really going to pull back demand in our sector.”

Noffke Roofing in Mequon, Wis., has seen insatiable demand during the pandemic. But lately, economic jitters are leading many customers to patch up their roofs instead of replacing them. Many are also trading down to cheaper materials, like shingles made of asphalt instead of cedar.

“We’re definitely starting to see a pause,” president Ben Noffke said. “Customers are saying, ‘I know it’s time to get a new roof, but can we get a little more time out of this one?’ They’re thinking about their budgets a lot more.”