Inflation and recession fears are pressing some industries more than others

It looks like people are still willing to travel, go to the movies and have a drink or two, even as rising prices and fears of a recession have pushed them back in other areas.

The way people spend their money is changing as the economy slows and inflation rises everywhere including gas stations, grocery stores and luxury retail stores. The housing market, for example, is already feeling the pinch. Other industries have long been seen as recession proof and may be enjoying a shock as people start to move out again after bouncing during the pandemic.

Shoppers everywhere still feel the pressure. In May, a measure of inflation that measures prices for a wide range of goods and services jumped 8.6% from a year ago, the largest jump since 1981.. Consumer optimism about their financial conditions and overall economic sentiment fell to 50.2% in June, the lowest level on record, according to the University of Michigan’s monthly index.

With gas and food prices on the rise, New York City-based artist Brigitte Engler said she’s driving less to her second home upstate and eating out less.

“Twenty dollars seems expensive at this point for lunch,” she said.

Here is a look at the performance of different sectors in light of the slowdown in the economy.

Concerts, movies, travel and other experiences people missed during the height of the pandemic are among the industries with strong demand.

Live Nation Entertainment, which owns concert venues and Ticketmaster, has not yet seen people’s waning interest in attending concerts, CEO Joe Berchtold said at the William Blair Growth Conference earlier this month.

In cinemas, blockbuster films such as “Jurassic World: Dominion” and “Top Gun: Maverick” also achieved strong sales at the box office. The movie industry has long been considered “stagnation proof,” since people who give up expensive vacations or frequent Netflix subscriptions can still often buy movie tickets to get away for a few hours.

Alcohol is another category generally shielded from economic downturn, and people are going out to bars again after drinking more at home during the early days of the pandemic. Even as breweries, distillers, and winemakers are raising prices, companies are betting that people are willing to pay more for better quality alcohol.

“Consumers continue to trade higher, not lower,” Gavin Hattersley, CEO of Molson Coors Beverage, said on the company’s earnings call in early May. It may sound counterintuitive, but he said the trend is in line with the recent economic downturn.

Alcohol sales were also protected in part because prices did not rise as quickly as other commodities. In May, alcohol prices were up about 4% from a year ago, compared to an 8.6% jump for the overall CPI.

Major airlines such as Delta, American and United are also expecting a return in profitability thanks to increased travel demand. Consumers have largely absorbed the higher prices, which has helped airlines cover the steep cost of fuel and other expenses, despite a drop in domestic bookings in the past two months.

It’s not clear if the race back to heaven will continue after the rush of travel in the spring and summer. Business travel usually picks up in the fall, but airlines may not be able to count on that as some companies are looking for ways to reduce expenses and even announce layoffs.

People’s desire to go out and socialize again is also boosting products like lipstick and high heels that have been phased out during the pandemic. That recently helped sales at retailers including Macy’s and Ulta Beauty, which last month boosted their full-year profit forecasts.

Luxury brands like Chanel and Gucci have also proven to be more resilient, as wealthier Americans have not been affected by the price hikes in recent months. Their challenges have been more concentrated in China recently, where epidemiological restrictions remain.

But the fear is that this dynamic could change quickly, and the short-term gains for these retailers could evaporate. More than eight in 10 US consumers plan to make changes to roll back their spending in the next three to six months, according to a survey by the NPD Group, a consumer research firm.

“There is a tug of war between the consumer’s desire to buy what they want and the need to make concessions based on the high prices hitting their wallets,” said Marshall Cohen, senior retail industry advisor at NPD.

The once overheated housing market is clearly among the markets hit by the economic slowdown.

Higher interest rates have dented mortgage demand, which is now half what it was a year ago. Homebuilder sentiment fell to its lowest level in two years after falling for six consecutive months. Real estate firms Redfin and Compass both announced layoffs earlier this week.

“With May order below expectations at 17%, we don’t have enough work for our agents and support staff,” Redfin CEO Glenn Kellman wrote in an email to employees later posted to the company’s website.

For the retail sector more broadly, data from the Commerce Department also showed a surprising 0.3% decline in May overall from the previous month. This included a decline in online retailers and diversified retailers such as florists and office suppliers.

And while demand for new and used cars remains strong, auto executives are beginning to see signs of potential problems. With the cost of new and used cars climbing in double digits over the past year, auto and other vehicle dealers saw sales decline 4% in May from the previous month, according to the US Department of Commerce.

John Lawler, Ford Motor’s chief financial officer, said this week that delinquencies on auto loans are starting to rise, too. Although the increase may signal troubled times ahead, he said it is not a concern yet, as cases of late payments have been low.

“It looks like we’re moving back more towards the middle,” Lawler said at the Deutsche Bank conference.

The restaurant industry is also seeing signs of a potential problem, although how restaurants are affected may vary.

Fast food chains have always fare better in downturns because they are more affordable and attract diners with promotional deals. Some restaurant companies are also betting that people will continue to eat out as long as groceries are rising faster.

The cost of food away from home rose 7.4% over the 12 months ending in May, but food prices at home rose even faster, jumping 11.9%, according to the Bureau of Labor Statistics. Restaurant Brands International CEO Jose Seal and Wendy CEO Todd Penegor are among fast food executives who have highlighted the gap as an advantage for the industry.

But McDonald’s CEO Chris Kempczynski said in early May that low-income consumers were starting to demand cheaper items or cut back on the size of their orders. As the largest American restaurant chain by sales, it is often seen as a leader in the industry.

Moreover, traffic across the broader restaurant industry slowed to its lowest level of the year in the first week of June, according to market research firm Black Box Intelligence. That was after the number of visits also slowed in May, although sales rose 0.7% with higher spending per visit.

Restaurants are speeding up discounting, a sign that they expect same-store sales growth to slow, Barclays analyst Jeffrey Bernstein also said in a research note on Friday. Among the chains that introduced new deals to lure diners, Domino’s Pizza, which offers half-price pizza, and Wendy’s, which brought back the $5 Biggie Bag meal.

Among those striving to adapt to a shift in shopper behavior are large-scale retailers such as Target and Walmart, who have issued cautious guidance for the coming year.

Target warned investors earlier this month that its financial earnings for the second quarter will be hit as it discounts people who bought during the pandemic but no longer wanted, such as small appliances and electronics. The big-box retailer is trying to make room on its shelves for products in demand right now: beauty products, home essentials, and back-to-school supplies.

CEO Brian Cornell told CNBC that the company’s stores and website were still seeing strong traffic and a “very resilient customer” overall, despite the change in buying preferences. Rival Walmart has also been discounting less sought-after items such as clothing, although the retail giant said it is gaining a stake in groceries as shoppers look to save.

Leslie Joseph, Lorraine Thomas, Michael Wayland, John Rosivier, Sarah Whitten and Melissa Rybko contributed to this report.