Summer Trends
Summer officially started June 21, 2010. It’s the season for swimsuits and sunscreen. In addition to cramming your mini-van to the brim with luggage and gear, or carefully packing your one-bag-per-person-and-forget-the-carry-on luggage, you’ll probably participate in and/or notice lots of other summer trends and traditions. The economy and your budget are all affected during the summer months to some degree. Understanding these trends and knowing what you can do for your own pocket-book will help with your summer spending strategy.
THE ECONOMY
The economy is subject to seasonal fluctuations because consumers need to buy different products and services as the seasons change. For that reason, certain industries do better during particular months or seasons. Here are some economic trends you can often observe during the summer:
- Home sales increase from late spring through early fall, compared with the colder months of the year. Buyers like to look at houses when the weather is nice, and sellers like to list houses when lawns are green and flowers are blooming.
- Gas prices often increase – particularly between Memorial Day and Labor Day – because consumers are driving or flying for summer vacations and become more willing to pay the higher prices (people hesitate to nix the summer vacation because gas costs an extra couple bucks).
- Hollywood releases summer “blockbusters” to maximize profits while America’s youth are out of school.
- Many farmers make a large portion of income during summer harvests; farmers often hire seasonal workers to assist.
- Large elements of the tourism and travel industry experience a spike in earnings during the summer months and hire seasonal employees to service the demand. Airlines often offer more flights.
- Electrical companies raise rates, and Americans use a lot more electricity as air conditioners work away to cool us.
Often summer economic numbers tell us something we already knew. For example, spending was way down in most areas during the summer of 2009, but the movie industry did well. This Hollywood trend shines through during most recessions and was true of the Great Depression – people seem to want to spend their shrinking discretionary budgets on escapism. On a less positive note, teen employment will be down this summer (2010), according to this CNBC article. Apparently the teen jobless rate is a result of the overall jobs market situation: Adults are willing to work for less money because jobs are scarcer, so they are taking jobs typically allotted to teens during the off-school months.
Most economic indicators are adjusted for seasonal fluctuations. Still, the extent to which industries experience the anticipated spike in revenues (compared with previous years) is often indicative of the overall economy, and some financial industry observers use the numbers to measure the current economy and predict economic change. For example, this Morningstar article discusses the expected increase in vacationers this summer over last summer – an indication that people are more confident in their financial stability and feel able to spend the money. As we approach “seasons” wherein we typically see a surge in consumer spending – like back-to-school season and the winter holiday season – pundits will likely refer back to the strength of summer spending, as compared with previous summers, to predict future spending.
YOUR BUDGET
Individual consumers often take a hit during the summer. Of course consumers spend more than usual around the winter holiday season and there are smaller spending spikes associated with Valentine’s Day and Halloween and three-day-weekend holidays. But the entire three months of summer can leave some Americans with tighter budgets. Remember all those economic changes mentioned above? Well you’re paying for them. You’re taking the summer vacations, eating out more, golfing, going to amusement parks and summer movies. You are hanging out at the pool. Your children or grandchildren are out of school and spending more money on recreational activities. Your air conditioner is roaring away. Your water bill is increasing as you fight to keep that lawn green and the flowers alive. You are buying all that lovely fresh fruit that is only available during the warmer months.
Your budget might be asking you what you’re thinking.
To avoid the budgetary summer blues, some annual planning is helpful. When you create your budget, think about the total costs per year for each line item. If you know you’ll vacation in the summer, create a vacation fund to which you contribute all year long – so you avoid a summer shock. If your electric company offers an averaging program, sign up so you pay the same amount each month. If you plan to eat out more during the summer, create a dining fund. Contribute money year-round so that you can have your summer fun without a summer pain. The same applies for automobile gas, your natural gas utility bill, groceries and more. Further, consider your winter holiday season spending, and account for that each month. In this way you can avoid the cycle of relying on credit cards during expensive seasons.
Remember that a predictable budget is a happy budget. Planning ahead will enable you to make planned purchases without stress and without temptation to cut essentials like retirement plan contributions.
Carolyn Humpherson, Financial Communications Specialist
About Smart401k
Smart401k is a Web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans. Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at Smart401k.com.
