"Happy inflation" is heating up in the US: Hobby-related spending rose 7.9% year-on-year in August, and Gen Z's gaming spending increased by 20% over the past year.

American consumers are paying higher prices for leisure and entertainment, but their spending enthusiasm has not cooled significantly. As travel costs continue to rise, home-based hobbies such as outdoor sports, video games, and handicrafts are becoming new growth drivers for consumption, fueling a phenomenon known as "funflation."

According to a CNBC report, a recent analysis by Bank of America shows that in August 2026, U.S. consumer spending on hobbies and interests increased by 7.9% year-over-year, significantly higher than the 3.4% increase in the number of actual transactions. This indicates that the growth in spending stems not only from an increase in the number of purchases but also from an increase in the average expenditure per transaction. Data from the U.S. Census Bureau also shows that over the past 12 months, sales of sporting goods, hobby items, musical instruments, and books increased by 10.7% year-over-year, significantly higher than the 6% increase in total U.S. retail and food service sales.

A key factor behind this trend is rising travel costs. With airfares soaring, some American consumers are shifting their travel budgets towards home entertainment and hobby-related purchases. For retailers of sporting goods, games, and crafts, this signifies a structural shift in consumer demand.

Travel is getting more expensive, while home-based hobbies are filling the spending budget.

Bank of America analysis points out that the recent acceleration in spending on hobbies is clearly linked to rising travel costs. Data from the International Air Transport Association (IATA) shows that in the week ending September 18, the global average price of jet fuel rose to around $194 per barrel, a significant increase compared to the same period last year; data from the U.S. Bureau of Labor Statistics shows that U.S. airfares rose 23.4% year-on-year in August.

John Gathergood, professor of economics at the University of Nottingham in the UK, said that when a certain type of consumption becomes more expensive, consumers may substitute it for different activities, such as reducing overseas travel and dining out, and instead increasing spending on home hobbies and homemade meals.

It's worth noting that Bank of America did not include travel in its statistics on hobby spending; therefore, the 7.9% increase primarily reflects growth in non-travel leisure spending. This means that rising travel costs do not necessarily directly reduce the overall leisure spending budget; some expenditures may simply be shifting from "out-of-town spending" to "stay-at-home spending."

Despite the price increase, consumer spending remains strong.

"Happy inflation" is not simply driven by rising commodity prices. Data from the U.S. Bureau of Labor Statistics shows that as of August, the entertainment-related CPI rose 2.7% year-on-year, lower than the 7.9% increase in spending on hobbies and interests, indicating that consumer demand itself is also growing.

Morningstar senior equity analyst Dan Wasiolek said the pandemic accelerated the shift in consumer spending from physical goods to experiential consumption, a trend that continues. A PwC survey of over 2,000 adults in April showed that respondents planned to spend an average of nearly $2,900 on travel this summer, with 71% expecting spending to be the same as or higher than the previous year.

In terms of age, Bank of America data shows that in the three months ending in August, older millennials spent the most on hobbies, more than twice as much as Generation Z; Generation Z, on the other hand, spent the least among all age groups. Bank of America analysts believe this may be related to increased spending on low-cost hobbies such as art, crafts, and board games.

Video games are showing a cross-generational growth trend. In the 12 months ending in August, per capita spending on video games increased significantly across all age groups, with even Generation Z, which saw the lowest growth rate, experiencing a 20% year-on-year increase in spending.

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