Can I live without it?

Sandy Magny plans to take her teenage daughter to West Palm Beach, Florida, this summer, even though airfares are surging.

It won’t be cheap, but Magny doesn’t want to miss out on visiting her family. The 40-year-old paralegal, who lives in the Bronx and works in the financial district of Manhattan, is finding there are other things she can do without.

“I do bring lunch more,” she said. “I could make coffee in the office.”

Magny is one of millions of people starting to shift where her dollars go after two years of the Covid-19 pandemic. Consumer prices have increased at the fastest clip in four decades. The cost of everything from housing to a latte is on the rise, begging the questions: When — and where — will consumers cut spending?

Some companies are already feeling the impact as they try to pass higher costs along to customers.

Amazon‘s most recent quarterly sales grew at the slowest pace since the 2001 dot-com bust. Netflix lost subscribers in the last quarter for the first time in more than a decade. Video game maker Activision Blizzard, home appliance giant Whirlpool and 1-800-Flowers all reported weaker sales in the last quarter.

Meanwhile, companies from Ford to McDonald’s to Kraft Heinz to United Airlines have reported resilient demand as consumers keep spending in spite of higher prices.

The changes in consumer behavior have some executives on edge.

“We do believe that the consumer is going to be spending,” Macy‘s CFO Adrian Mitchell said at JP Morgan’s Retail Round-Up last month. “But are they going to be spending on discretionary items that we sell, or are they going to be spending on an airline ticket to Florida, or travel, or going out to restaurants more?” 

Coca-Cola CEO James Quincey told CNBC last week that customers won’t “swallow inflation endlessly.” 

Consumer spending, as measured by the Commerce Department, rose a seasonally-adjusted 1.1% in March. And spending remains strong even among low-income households with an annual income of less than $50,000, according to Bank of America data. (The data exclude households that do not have access to cards.)

But consumer confidence, a measure of shoppers’ sentiments around market conditions reported by The Conference Board, ticked lower in April.

“We’re not really seeing many signs of slowdown, despite the worries that are happening in the market,” said Anna Zhou, a U.S. economist for Bank of America.

One reason is the amount of money that people socked away during the pandemic. On average, low-income households have $3,000 in their savings and checking accounts – nearly double what they had at the start of 2019, according to the Bank of America’s internal data. That has given consumers a buffer, even as they pay more at the gas pump and grocery store, Zhou said.