It’s common knowledge that in a financial crisis, people begin to cut the fat by allocating finances elsewhere in an effort to make up for the loss. Hence, travel and entertainment seemingly always gets the axe first. Perhaps a good indicator of economic recovery is to observe the trends for those areas in an effort to judge the overall health of the country. 

 

Last week, the federal government released statistics showing an upswing in consumer spending, including increases in travel and entertainment. Still on the mend, levels haven’t quite reached what they were at their peak, though the government report appears optimistic.


Consumer spending increased at an annual rate of 3.9% in the first quarter of 2010, following a decrease of 1.5% in the fourth quarter of 2009. By comparison, real gross domestic product increased 3.0% in the first quarter of 2010 after increasing 5.6% in Q4 of 2009. The figures include a 3.1% increase in recreation and entertainment spending and a 4.5% increase in retail spending by tourists over the fourth quarter of last year, according to the Department of Commerce’s Bureau of Economic Analysis. Real output for recreation, entertainment and shopping within the tourism sector rose 3.9% to $162.2 billion.


The report shows tourists became more willing to fly in the first quarter despite a rise in airline fares. Spending on passenger air transportation increased 4.5%, despite a 13.3% increase in prices following a 9.8% decline in the fourth quarter. Spending on accommodations, by contrast, rose 11.0% on a 6.4% decline in prices as hotels, motels and resorts lowered room rates. That followed a 7.9% decline in spending on accommodations in the fourth quarter.


The report estimated that prices for tourism related shopping rose 1.8% in the first quarter, or about half the 6.5% pace of the fourth quarter.