New Data Shows Inflation Could Stunt Travel Spending Rush

A new report from Mastercard Inc indicated that “runaway inflation” was hurting the spending habits of lower-income customers, including travel purchases.

According to Reuters.com, the study found that cardholders are shifting their priorities from big-ticket items to essentials and groceries, but travel still remains a priority and helped the credit card company round out a strong quarter.

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Mastercard reported the strongest summer travel season since the start of the pandemic, thanks to pent-up demand and the easing of coronavirus-related restrictions. Cross-border volumes also jumped 58 percent on a local currency basis in the second quarter, increasing dollar volumes on the company’s network by 14 percent to $2.1 trillion.

“In the United States, what you are seeing is a declining trend in terms of the growth rates on the lower income side of things,” Mastercard Chief Financial Officer Sachin Mehra said during a quarterly conference call with investors.

While spending by higher-income consumers and the surge in cross-border volumes will keep spending strong for now, the company is looking at the possibility of a recession after two quarters of contraction as a sign that travel spending could decline.

Credit card company Visa Inc told Reuters the company has yet to see signs of a pullback in spending from its cardholders.

In June, location-based insights provider PlaceIQ released new data revealing that Americans are back on the move after two years of diminished travel and decreased visits to retail and dining locations.

However, U.S. consumers’ spending in these categories is down across the board compared to last year. The data suggests the current inflation situation is to blame for the consumer behavior trend, not pandemic-related factors like social distancing or stay-at-home advisories.

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