Uber’s CEO says a strong quarter shows how people are spending their money very differently than they were a year ago

Uber released its fourth-quarter results on Wednesday, which beat analysts’ revenue expectations. Sales jumped 49% year over year, which helped push Uber stock up 11% this week.

“We delivered our strongest quarter to date in Q4, ending our strongest year,” Uber CEO Dara Khosrowshahi said in a statement, adding that the impact of the pandemic on Uber’s business is now “completely behind lying to us”.

The ride-sharing company has been particularly hard hit by the pandemic after growing explosively over the decade before. At the peak of the pandemic-related lockdowns in spring 2020, Uber’s business shrank by as much as 80% in some cities, while the company averaged just 55 million customers per month between April and June this year, compared to 99 million a year earlier in 2019.

But Uber’s return to growth also tells a different story, as Khosrowshahi pointed out that the company’s fortunes stem from a major shift in how Americans spend their money: after years of primarily spending on durable goods , a pandemic-related effect that contributed to some of the rising inflation over the past year, people are finally spending money on services again.

While Khosrowshahi said Uber is cautious about the economic landscape as recession risks are high, he is also “more confident than ever about our prospects.” We continue to benefit from the shift in consumer spending from goods to services.”

America’s Spending Shift

The reorientation of US consumer spending in 2020 towards goods rather than services may have been one of the most lasting economic impacts from the early days of the pandemic, when many people forcibly and then voluntarily forgo vacations, fitness, and eating out at restaurants.

At the same time, American households have been doing well financially thanks to stimulus money, leading to a national disposable income increase of $1.8 trillion in 2020, according to a 2021 Fed study. Reduced spending on services has been replaced by a surge in durable goods purchases as people outfitted their home gyms and remodeled their homes.

However, the rising demand for goods had some nasty side effects as it caused supply shortages which, along with pandemic-related lockdowns at manufacturing plants and shipping centers worldwide, contributed to rising US inflation as of 2021, which Americans are still grappling with.

A return to more balanced spending on goods and services could help ease inflationary pressures by relieving pressure on supply chains, and Uber’s strong earnings are the latest signal that spending is rebalancing. Spending on services in the US rose 2.6% in the fourth quarter of last year, according to the latest GDP figures from the Bureau of Economic Analysis, as Americans returned to spending on travel and other services despite rising inflation.

Uber CEO Khosrowshahi said in an interview with CNBC on Wednesday that he sees the spending shift away from retail and back to services as still happening.

“During the pandemic you saw a huge shift in retail spending and now that you’re out of the pandemic you’re seeing the shift coming from retail to services and by the way that shift isn’t over yet. In terms of spending on services, we are not back to pre-pandemic levels,” he said. “We see no signs of consumer weakness at this time.”

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