The reopening of America has consumers confident again, just in time for the July 4 holiday that’s expected to be the busiest travel weekend since the start of the Covid-19 pandemic.
AAA predicts that over 47.7 million Americans will be on the roads or in the skies as travel volume reaches pre-pandemic levels. That figure would make this weekend the second-highest Independence Day travel volume on record, trailing only 2019, AAA said. Road trips are expected to dominate this summer, with 43.6 million Americans driving to their destinations. AAA said 3.5 million are expected to fly, resulting in air travel volumes reaching 90 percent of pre-pandemic levels. Another 620,000 Americans are expected to use other means of travel, such as buses or trains, and cruising is back, it added.
“Travel is in full swing this summer, as Americans eagerly pursue travel opportunities they’ve deferred for the last year-and-a-half,” Paula Twidale, senior vice president, AAA Travel, said. “We saw strong demand for travel around Memorial Day and the kick-off of summer, and all indications now point to a busy Independence Day to follow.”
Giving a boost to the urge to get away has been the rollout of the vaccination program in the U.S. President Joe Biden, in a prime-time address on March 11, said that if Americans do their part, there’s a chance by July 4 that families and friends will be able to celebrate the holiday together. While not everyone has received their jab and there are still those who need to get their second shots, those who have been fully vaccinated have been able to move more freely as state and local governments ease restrictions.
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That increase in mobility also has boosted consumer confidence. The Conference Board on Tuesday said its Consumer Confidence Index rose in June to its highest level since March 2020, considered the start of the pandemic in the U.S. The Index now stands at 127.3, up from 120.0 in May. Its two components also saw increases, with the Present Situation Index rising to 157.7 from 148.7 and the Expectations Index increasing to 107.0 from 100.9. The former measures current business and labor conditions, while the latter focuses on the short-term outlook over a period of six months.
“Consumers’ assessment of current conditions improved again, suggesting economic growth has strengthened further in Q2. Consumers’ short-term optimism rebounded, buoyed by expectations that business conditions and their own financial prospects will continue improving in the months ahead,” Lynn Franco, senior director of economic indicators at The Conference Board, said. She noted that consumers’ intention to purchase homes, autos and major appliances is a sign that spending will “continue to support economic growth” in the short term. “Vacation intentions also rose, reflecting a continued increase in spending on services,” Franco said.
One plus has been consumers’ assessment of current market conditions, with 54.4 percent noting that jobs are “plentiful,” up from 48.5 percent in May. The short-term labor outlook was mixed, with those who said they expect more jobs ahead falling to 25.7 percent from 27.7 percent. Conversely, only 16.0 percent said they anticipate fewer jobs versus 17.5 percent in the prior month. In addition, consumers were also more upbeat about their short-term financial outlook, with 18.6 percent expecting their incomes to rise, up from 16.2 percent the month before.
For the economists at Wells Fargo Securities, June’s consumer confidence report could be an indicator that spending is on track for the second quarter. “The share of consumers planning to purchase homes, automobiles, and major appliances all rose. Although we see services outlays as the main driver of growth, we have maintained that thanks to accumulated savings, consumers can continue to spend on goods too,” they concluded in a report authored by Wells Fargo economists Tim Quinlan and Sara Cotsakis.
More stimulus in the form of child care tax credits is expected to fuel a robust second half for 2021 as consumers shop for back-to-school apparel and home goods. And while the consumer confidence survey for June indicated an intent to head out on vacations again, the Wells Fargo economists “expect the actual increase in vacation spending will rise even more.”
Those anticipated crowds as consumers pack up to travel, along with money in their pockets to spend, should be good news for retailers.