High fuel costs and the threat of a hurricane are not expected to dampen Americans' desire to hit the road this summer, with vacationers preparing for record travel to kick off Fourth of July holiday festivities.
Motorist group AAA expects a record of almost 71 million people to travel around the U.S. Independence Day holiday, growth similar to a pre-pandemic trajectory.
Some 60 million people will drive with nearly 6 million flying to their destinations, while around 4.6 million people will take buses, trains or cruises during the holiday period, according to AAA's forecast.
"We've never seen numbers like this," AAA spokesperson Andrew Gross said. "2024's travel seems to be what 2020 would have been, had it not been for the pandemic," he added.
U.S. summer travel will be closely watched from multiple fronts this year, as it could offer central bank officials and policymakers an important measure of consumer sentiment in an election year.
Inflation was unchanged in May even as consumer spending rose, boosting hopes that the U.S. Federal Reserve might be able to control inflation while avoiding a recession.
Gasoline prices have eased over the past few months, with the national average price for a gallon of motor fuel at $3.50 on Tuesday, a 3 cent decline from last year. Domestic airfare is 2% cheaper than last year, with an average domestic round trip costing $800, according to AAA booking data.
Despite recent declines, fuel prices remain well above historical levels. The average price for a gallon of gasoline was $2.74 during the July Fourth week in 2019, and the weekly average price from 2015 through 2019 was under $2.50 a gallon.
Still, vacationers' travel plans are largely unaffected by higher prices this year, according to a survey of over 1,000 people by auto retail group American Trucks.
"What we have noticed is that it's more about the rate of change than the price itself that affects the psyche of consumers," said John LaForge, head of real asset strategy at Wells Fargo Investment Institute.
Since the price of gasoline has not moved dramatically higher or lower in the past six months, consumer psyche is largely unaffected by it, LaForge said.
For now, U.S. vacation travel is unlikely to be affected by Hurricane Beryl, which has brought devastation to some Caribbean Islands since Monday, but is expected to weaken considerably as it reaches Mexico's Yucatan Peninsula by Thursday night.
U.S. fuel inventories are also better stocked than they have been in recent years, providing motorists a buffer from sudden price shocks in case the hurricane disrupts refining operations.
U.S. gasoline stockpiles stood at around 234 million barrels in the week ended June 21, about 5% higher than the same time last year, government data showed. Diesel stocks were around 6% higher, while jet fuel stocks were about 7% higher than last year.
"Americans are optimistic and wanting to travel, there's no denying it," GasBuddy analyst Patrick De Haan said.
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