Which Higher Prices Are Here to Stay?
11 June 2021 - 6:42AM
Dow Jones News
By Gwynn Guilford
Inflation is heating up across the economy as the ebbing of the
pandemic unleashes pent-up consumer demand at a time of supply
shortages. Overall consumer prices jumped 5% in May from a year
earlier -- the biggest increase since 2008, the Labor Department
reported Thursday.
Some of these increases -- such as for airfares, restaurants and
women's suits -- reflect a return to normal, or pre-pandemic price
levels, after prices collapsed last year due to business closures
and restrictions and consumers' fear of traveling and getting
infected. Some -- such as car and truck prices -- are due to
shortages of specific components or materials. Such jumps are
likely to prove temporary and unlikely to lead to persistent
increases for years to come.
Other price rises, however, could reflect more lasting changes
in workers' and consumers' behavior over the past year. Here are
some examples of May price increases hitting consumer pocketbooks
directly:
Returning to Normal
Restaurants: Prices for meals at full-service establishments
rose 0.6% in May from the month before, and were up 4% from a year
earlier. Meanwhile, grocery prices are rising more slowly this year
than during 2020, when people shifted to eating more at home.
Price pressures may continue to build in coming months as people
venture out more. The average number of seated diners tracked on
the restaurant reservation platform OpenTable was down in the first
week of June just 9% from 2019 levels. That is better than the
figures for the first week of May, when they were down 21% from two
years earlier.
Travel: Americans' yen for travel after spending a year cooped
up is another big cause of the pickup in overall prices. The volume
of travelers passing through TSA airport checkpoints has recovered
to nearly 75% of 2019 levels, versus about 40% at the beginning of
the year. The rush to return to the skies drove airfares up 24.1%
in May from a year before, while hotel and motel prices rose by 9%
over the same period, the most on record.
While these increases are dramatic, they are not necessarily a
sign of lasting price pressures. Prices for both services plummeted
during the pandemic thanks to lockdowns, travel restrictions,
telecommuting and fear of the virus. Airfares are still down 12%
from February 2020 levels, while prices for hotels and motels are
off by 4.6%.
Apparel: Prices for women's suits and dresses plummeted last
year as the pandemic canceled social events and people shifted to
working from home. In May, however, those prices rose from a year
earlier for the first time since the Covid-19 crisis began, as more
women left the house. The decline in prices for men's suits slowed
sharply last month as well.
Supply Shortages
Vehicles: One-third of the monthly increase in CPI in May came
from a jump in prices for used cars and trucks. A global shortage
in semiconductor chips exacerbated by the pandemic has held back
production, leaving dealership inventories lean. That shortage in
new cars has tightened the supply of used cars as owners hold on to
their vehicles longer -- which, in turn, sent the prices of used
cars and trucks soaring 29.7% in May, versus a year ago.
The new-car shortage also is making it hard for rental car
companies to restock their fleets after selling off many of their
vehicles last year when travel collapsed. Now, demand is far
outstripping the already limited supply of rental vehicles, sending
prices soaring nearly 110% higher in May than they were a year
earlier.
Jeffrey Stark, 28, of Arlington, Va., wants to travel more now
that businesses are opening back up, but he is finding that high
prices and scarcity of goods and services are curtailing his
ambitions. He is flying to Utah next week for a family event, and
had initially planned to tack on a few extra days to explore on his
own -- only to scrap those plans when he couldn't find a car to
rent.
"My travel this year seems like it's going to be largely limited
to visiting people rather than places because I'm seeing reports of
completely booked hotels and, especially, no available rental
cars," said Mr. Stark, a geographic information systems analyst for
the postal service.
Still Strong Spending From Home
Furniture, appliances and other home goods: These prices rose
sharply during the pandemic and are continuing to climb as people
still spend more time at home than before the pandemic. Prices for
living room, kitchen and dining room furniture rose 9.8% in May
from a year earlier, while prices for bedroom furniture, appliances
and indoor plants and flowers rose sharply too.
Write to Gwynn Guilford at gwynn.guilford@wsj.com
(END) Dow Jones Newswires
June 10, 2021 16:28 ET (20:28 GMT)
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