Inflation Could Slow Travel Spending Rush, New Study Indicates

According to a new analysis from Mastercard Inc, “runaway inflation” is affecting lower-income consumers’ buying patterns, especially travel expenditures. The survey discovered that cardholders’ priorities are changing from big-ticket products to necessities like groceries, although travel remains a priority, helping the credit card business close off a great quarter.

Mastercard reported the busiest summer travel season since the pandemic began, owing to pent-up demand and the relaxation of coronavirus-related restrictions. Cross-border volumes increased by 58 % in local currency in the second quarter, with company’s dollar volume network jumping by 14 % 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 higher-income customers’ spending and a jump in cross-border volumes will keep spending steady for the time being, the company sees the prospect of a recession following two-quarters of contraction as an indication that travel expenditure may drop. Visa Inc, a credit card provider, indicated that it has yet to observe evidence of a decline in spending among its cardholders.

PlaceIQ, a location-based analytics provider, presented fresh data in June demonstrating that Americans are back on the move after two years of reduced travel and visits to retail and dining venues. However, consumer spending in these areas in the United States is down across the board compared to last year. According to the research, the present inflation scenario, rather than pandemic-related factors like social isolation or stay-at-home advice, is to blame for the consumer behavior trend.