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June 28, 2024

The ‘funflation’ effect: Why Americans are spending on travel and entertainment

The 'funflation' effect refers to the phenomenon whereby consumers are willing to spend more on experiences such as travel and entertainment, despite rising prices (inflation). This trend reflects several socio-economic factors. Firstly, we are witnessing a shift in consumer value perception - people have started prioritizing experiences over tangible goods. Hence, an increasing number of Americans are willing to spend more on holidays, concerts, or fine dining experiences, rather than buying physical assets or products. Secondly, after months of restrictions and lockdowns due to the Covid-19 pandemic, there's pent-up demand and desire for outdoor experiences, leading to more spending in these sectors. Thirdly, with the rise of remote working, many people have realized they can work from almost anywhere, increasing the appeal and feasibility of travel. Finally, there's also a psychological aspect. Spending on experiences often brings happier and longer-lasting memories compared to purchasing things, additional motivation for people to invest more in travel and entertainment despite rising costs. However, it's important to note that this trend is generally more applicable to those in a secure financial position. Not everyone can afford the increased costs of travel and leisure activities amid inflation pressures.