A tale of two expenditure types in 2022

25. October 2022 (in Deutsch / en Francais)

  • Stairway to heaven for hotels and restaurants
  • Sticky demand for fuel: Are voluntary energy savings wishful thinking?

Stairway to heaven for hotels and restaurants

“All that glitters is gold, And she’s buying a stairway to heaven…” says the famous song of Led Zeppelin, and this is how much of the hospitality sector must have felt over the past year: With the pandemic restrictions and regulations of the economy being lifted, tourism picked up and people poured back into restaurants and hotels. Indeed, inspecting the card-expenditure data of Monitoring Consumption Switzerland we see that expenditure associated with restaurants and hotels have increased tremendously in the last half a year relative to the same time period in 2021.1 However, there is much talk about inflation – how does the increase look in real terms?

Figure 1: Nominal turnover and inflation-adjusted turnover for food and beverage services, and accommodation, both indexed to ISO week 7, 2021.

The light colors in Figure 1 show expenditure in the categories food & beverage services and accommodation in nominal terms, indexed to 100 in the benchmark week 7/2021, the week in which restrictions have been lifted in 2022. The darker lines in Figure 1 show that the expenditure increase remains substantial if we adjust for inflation, based on inflation data per expenditure category available at the FSO. Cumulating the differences in inflation-adjusted expenditures between 2022 and 2021 between week 7 in February and beginning of October 2022, we find that expenditures for food services and accommodation increased by 67% and 30% in real terms, truly a stairway to heaven.

Sticky demand for fuel: wishful thinking about voluntary energy savings?

As in the hospitality sector, turnover for fuels exhibit a strong surge: However, as Figure 2 shows, large increases in nominal expenditures in 2022 relative to 2021 do not necessarily imply increases in inflation-adjusted expenditures. The differences in inflation-adjusted expenditure at fuel stations between 2022 and 2021, cumulated from February until October, decreased slightly by 3% although nominal cumulated expenditures increased by 24%.  The much bigger differences between the changes of nominal and inflation-adjusted expenditures for fuel obtain because prices for fuel have increased by 34% since February 2021 but only 2% for accommodation and 3% for restaurants.

Figure 2: Nominal turnover and inflation-adjusted turnover for retail: fuel stations, both indexed to ISO week 7, 2021.

Interestingly, the strong price increase for fuel has not triggered hefty substitution away from fuel expenditure, illustrating the well-known fact that demand for fuel is sticky.2 Our evidence supports the anecdotes discussed in the media which emphasize that changes in behavior triggered by surging fuel prices are at best small in Switzerland. Time will tell whether the even larger increases in gas prices will induce stronger demand reductions for energy consumption by private households, which the Swiss government hopes for.

Unfortunately, we cannot track expenditures on energy bills in our data because households rarely pay such expenditures using a debit or credit card. The evidence for fuel expenditures, however, has been humbling so far and suggests that it may be wishful thinking to expect large reductions in energy consumption or energy savings as energy prices soar. Of course, an economic environment with more uncertainty may contribute to less energy consumption in the near future.

1 We do not compare expenditures between 2022 and 2019 because the pandemic has triggered shifts from cash to card expenditures which make comparison of expenditure levels before and after the pandemic more difficult to Interpret.

2 Note that the reported differences in expenditure are cumulated between February and October 2022, whereas the price changes are year on year and refer to the beginning of October 2022. Therefore, these two changes cannot be combined to obtain year on year changes in quantities.