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Can I live without it?

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A pedestrian carries bags in the Herald Square area of ​​New York, USA, on Wednesday, April 13, 2022.

Kala Kessler Bloomberg | Getty Images

Sandy Magney plans to take her teenage daughter to West Palm Beach, Florida, this summer air fares are rising.

It won’t be cheap, but Magnie doesn’t want to miss visiting her family. The 40-year-old lawyer, who lives in the Bronx and works in the financial district of Manhattan, finds that there are other things she can do without.

“I bring lunch more,” she said. – I could make coffee in the office.

Magni is one of millions of people starting to move where her dollars are going after two years of the Covid-19 pandemic. Consumer prices have risen by the fastest clip for four decades. The cost of everything from housing to lattes is rising, raising questions: when and where will consumers cut costs?

Some companies are already feeling the impact of trying to pass on higher costs to customers.

AmazonRecent quarterly sales have grown by the slowest pace since the dot-com crash in 2001. Netflix lost subscribers in the last quarter for the first time in more than ten years. Creator of video games Activision Blizzardhome appliance giant Faith and 1-800-Flowers all reported weak sales in the last quarter.

Meanwhile the company of Ford office McDonald’s office Kraft Heinz office United Airlines reported sustainable demand as consumers store costs despite higher prices.

Changes in consumer behavior are causing some executives.

“We believe the consumer will spend,” MacyChief Financial Officer Adrian Mitchell said at JP Morgan’s Retail Round-Up last month. “But will they spend on items we sell on their own, or will they spend on a plane ticket to Florida, or on travel, or more going to restaurants?”

Coca-Cola CEO James Quincy said CNBC last week customers will not “swallow inflation indefinitely”.

Consumer spending, according to the Ministry of Trade, rose 1.1% in March, adjusted for the season. According to Bank of America, spending remains strong even among low-income families with annual incomes of less than $ 50,000. (Data excludes families who do not have access to cards.)

But consumer confidence, an indicator of consumer sentiment about market conditions, according to The Conference Board, fell in April.

“We don’t see many signs of a slowdown, despite concerns about the market,” said Anna Zhou, an American economist at Bank of America.

One reason is the amount of money people withdrew during the pandemic. On average, low-income families have $ 3,000 in their savings and current accounts – almost twice as much as they had in early 2019, according to Bank of America internal data. This has given consumers a buffer, even if they pay more at a gas station and grocery store, Zhou said.

Only good things

Many customers not only spend, but also find that more and more willing to spend money, whether it be in pairs of higher class LeviJeans or a first-class seat on a Delta Air Lines flight.

Apple on Thursday reported a “Record level of upgraders” during the first three months of the year, when users opted for more premium iPhones but warned of the impact of locks in China. And as automakers raise prices to reflect dense stocks due to global supply chain problems, those looking for cars aren’t intimidated.

Ford CFO John Lawler said this week that despite rising prices, the company still sees exceptionally high demand for its latest products, ranging from a small Maverick pickup truck, which costs about $ 20,000, to an electric crossover Mustang Mach- E, which in higher configurations can cost more than $ 60,000. It is already sold out for the 2022 model year.

United, Delta and Southwest Airlines are predicting 2022 profits due to seemingly insatiable demand from customers after two tough years of the pandemic, both for leisure and for business travel. Their own staffing constraints are holding back their flights even more.

According to travel agencies Airlines Reporting Corp., the cost of domestic tickets to the United States for travel between Remembrance Day and Labor Day averaged $ 526, which is more than 21% more than in 2019.

“The demand environment is the strongest of all my 30 years in the industry.” United Airlines This was announced on April 20 by CEO Scott Kirby income to release.

Travelers pass through Terminal A of Orlando International Airport on Christmas Day, Saturday, December 25, 2021.

Stephen M. Dowell | Arlanda Sentinel | Getty Images

CEO Levi Strauss & Co. Chip Berg told CNBC last month that despite rising prices, consumers are not trading less expensive denim. Levi has confirmed its forecast for fiscal year 2022, which predicts revenue growth of 11-13% over the previous year.

But there are signs that consumer appetites may be approaching the limit.

According to Adobe Analytics, the number of bookings of US domestic airlines in the first two weeks of April fell by 2% compared to the previous two weeks, which was the first decrease for such a period this year. In March, bookings increased by 12% compared to 2019, but customers’ costs for these tickets increased by 28%.

March restaurant traffic fell 1.7%, according to industry tracker Black Box Intelligence. Fine dining, upscale casual and family dining have marked the biggest jump in sales growth, but segments are still trying to break out of the pandemic lows.

Jodie Clobus, a 58-year-old mother of three and grandmother of four who lives outside of Albany, New York, told CNBC that she and her husband, a retired New York City police officer, had lunch twice a week. Now that their food and everything else is more expensive, they have shrunk to twice a month.

“I can feel it in my pocket,” Klobus said.

Challenges ahead in 2023

And there are other risks that can reduce consumer spending, even if the consequences don’t come right away. The rent is there marching above and property taxes have not caught up completely home prices are soaring.

The Federal Reserve is committed to fighting inflation by raising interest rates. It translates as higher borrowing costs for home buyers and credit card users.

In the fourth quarter, credit card balances in the U.S. grew by $ 52 billion, the biggest quarterly jump in 22 years according to the New York Fed, but they still fell by $ 71 billion from the end of 2019.

The level of credit card arrears in the US rose to 1.62% from a three-year low of 1.48% in the second quarter of last year, still far from a peak of 6.6% in the first quarter of 2009. The recession, according to Fed St. -Luisa.

“This year, consumer spending must remain sustainable,” said Zhou, an economist at Bank of America. “Next year it’s a little less certain – and of course until the second half of next year, when there may be a risk of a greater slowdown in consumers.”

I’m just complaining about the prices.

Cindy Maher

Bloomfield, Connecticut

Boeing CEO Dave Calhoun said Wednesday that demand for new aircraft from airlines is recovering thanks to a resumption of demand for travel. However, it is unclear whether Americans will continue to spend on travel in the coming months, or will reach a point if they cut back.

“In the second year that inflation is starting to hit consumers’ pockets, that’s when those numbers really start to matter to us,” Calhoun said in an interview with CNBC’s Squawk on the Street.

At the moment, many consumers, such as Cindy Maher, a 58-year-old woman who owns a leadership development consulting firm and lives in Bloomfield, Connecticut, feel comfortable enough to keep their spending habits.

“I’m not cutting,” she said. “I’m just complaining about prices.”

Maher said she noticed loaves of bread for almost $ 7 and that refueling her car costs $ 70. But she said that in her two-income family she could cover those expenses.

“My heart is to those who have low-paid jobs,” she said.

– CNBC Amelia Lucas and John Rosever contributed to this article.

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