US Consumers Remained Hungry for Services in June

In June, consumer confidence slipped somewhat even as some spending categories continue to see growth. Consumers reported that they were less likely to purchase big-ticket items (like cars, homes and appliances) but that they were still hungry for services. Indeed, recent personal consumption expenditures data showed strong growth in services and a retreat from goods.

Home entertainment and dining out are the top activities consumers intend to engage in over the next few months as the shift to services continues. While vacation plans have softened somewhat due to rising prices, 47 percent of respondents said they are still “greatly” or “somewhat” inclined to travel. Spending on in-person services has been slow to rebound from the pandemic, but has been a major consumption theme in 2022 due to pent-up demand (often at the expense of demand for goods).

However, looking ahead over the next six months consumer spending and economic growth are likely to continue facing strong headwinds from further inflation and interest rate hikes. The Conference Board forecasts that US economic growth will slow over the course of this year and that a shallow recession will occur in late 2022 and early 2023.