Experiential Spending on Travel and Restaurants Boosted U.S. Retail Sales

The U.S. economy is bouncing back by some measures, and the travel industry played a leading role in fueling that recovery.

Lodging, airlines and restaurants were three of the top five spending categories last month based on data from MasterCard’s July SpendingPulse report.

The report shows U.S. retail sales increased 4.6% year-over-year in July, representing the largest such growth since October 2012.

The shift toward “experiential spending” comes as hiring increases, and shows Americans are increasingly spending on non-essential items and leisure activities, according to the report.

“People are now actually feeling confident to take their vacation and book months in advance,” said Sarah Quinlan, group head of market insights at MasterCard. “Last year we saw a rise in driving trips, and this year there’s a rise in airline trips.”

July was the fifth consecutive month of growth for spending on airlines and notched the best growth rate for the category since July 2007, with airline spending up 3% in the first half of 2014. Mastercard also found that most airline spending is for domestic flights.

“Keep in mind that SpendingPulse measures consumer travel at the time a ticket is purchased, not used,”  said Marisa Grimes, a MasterCard spokesperson. “As a result, this sector is a leading indicator of consumer travel and tends to shed some light on consumer discretionary spend confidence.”

Lodging spending also saw gains in July and set a new total sales record for the fifth consecutive month. The growth is slightly higher than what should be expected for the summer season, Grimes says.

Restaurant spending saw above average growth, as well, and set a new record for July.

“Our research shows more people are moving back to the cities from suburbs, which explains why they’re now eating out more,” said Quinlan. “People are saying ‘I’m going to feel good now.'”

Fast food or casual restaurants saw double-digit growth last month, while spending at full-service restaurants also increased, but saw the price index fall and reach its lowest value on record for July.