By Jamie McGeever

ORLANDO FL (Reuters) – Americans seem to feel a bit tired of streaming and subscriptions online. It could be a sign that the larger economy is moving in the right direction.

Inflation is on the rise and consumers are having to change their spending habits. One of the biggest trends in COVID Lockdown is about to reverse.

Netflix (NASDAQ) raised concerns last week when it announced that Netflix subscriptions had fallen for the first-ever quarter. The company also cautioned that this slide might accelerate.

Warner Bros Discovery, NASDAQ: shut down its CNN+ streaming services less than a month following it’s launch. The service had attracted only 10,000 users per day.

Truebill is a personal finance application that assists 2.5 million people cancel and manage recurring payments. Its figures show that cancellations outnumbered new subscriptions for the first-time since 2015.

It is an increasing trend. The number of new subscriptions fell to 4.4% in March from 7% one year ago. In addition, 10.4% subscriptions were cancelled, nearly double the 5.6% a year prior.

“People are tightening the purse strings and being more selective about where they spend their money,” Yahya Mokhtarzada, Truebill’s chief revenue officer, told Reuters. We may have reached peak subscription.”

During pandemic lockdowns, Americans used a variety of online services – from software for work to video streaming or entertainment apps.

The ability to work remotely boosted household savings and allowed for socializing restrictions, as well as travel bans, meant that small sub-monthly payments for online distractions could be easily made.

Wethrift.com conducted an January survey with 1,030 people of various ages. 96% reported that they had at most one video-streaming service. 80% of those surveyed had a music streaming subscription. 57% had meal-kit delivery, 51% had beauty, wellness and well-being, and 56% did not fit into any category.

However, with travel, entertainment, and work slowly returning to some degree of normality and savings from energy and food price increases, people are reducing their direct debit lists.

It is clear that U.S. consumers seem to be able to handle the threats of rising interest rates, inflation, and the Russia-Ukraine conflict. Many economists believe that consumers will be able to absorb these losses as long as the labor market remains stable (the unemployment rate is only 3.6%).

Retail sales in the United States rose by 0.5% in March, and they were sharply revised to 0.8% growth for February. However, March’s overall retail sales were flattened by gasoline consumption. Online spending also posted back to back declines for more than one year.

The average nominal growth in wages is only 5.8%. That’s significantly lower than consumer price inflation at 8.5% and weak consumer sentiment.

TECH WRECK

The stock market sees tech and related sectors as the worst performers since the pandemic. They are also the ones that have fallen the most during the current downturn.

Complacency or excessive optimism may lead to complacency. You can only watch so many TV channels in one day. Subscriptions are not available to everyone. The saturated tech sector is investing in content more than any other space.

Partly, the Nasdaq’s performance this year is due to the realisation that subscription-based income streams might not continue as steadily as we thought.

This index fell 23% from November’s peak after rising 145% since March 2020’s low. Comparatively, the index is 13% lower than its peak in January, after rising 120% since March 2020.

Higher-stakes parts of tech are even more in trouble. Cathie Wood’s ARK Innovation ETF slumped 23% in the month of March, and is now down 46%.

Costs are rising and this is impacting consumer behaviour. Are there any easy ways that I can reduce my spending? Subscriptions are becoming more popular. “Consumer psychology is changing,” Julie Biel said, portfolio manager at Kayne and Rudnick.

Andreas Steno Larsen is an independent strategist who says the investment outcome could not have been simpler.The investment strategy is simple: “Invest in things that people use and cut out stuff they don’t.” It is as simple as that,” he advises, recommending investors buy consumer staples stocks like Walmart (NYSE:) and Procter & Gamble (NYSE:) versus consumer discretionary stocks like Amazon.com (NASDAQ:) and Tesla (NASDAQ:).

Other columns:

– U.S. Housing Market Alarm Bells Ring (Reuters, April 18).

Reuters April 8: Cold comfort when re-steepening the U.S yield curve

– Q1 investment verdict? Reuters, March 30, 2010: ‘Not bad, but certainly not awful’

(This column is written by a journalist for Reuters.

(By Jamie McGeever; Editing by Paul Simao)