The Philadelphia Inquirer
(TNS) – A few years ago, Yvonne Ferguson-Hardin had no trouble finding a used car for her oldest daughter. This year, car shopping for her younger daughter has been harder. And stranger.
One online seller never showed up to a meeting. Another was actually selling toy cars instead of real ones. Then there are the prices: In 2018, Ferguson-Hardin said, she paid $2,500 for a 2008 Honda Civic. Now, she sees prices twice as high for similar cars.
“We’re looking at the price in comparison to the miles. It’s just really, really overpriced,” said Ferguson-Hardin, 56, of Philadelphia. “It’s very surprising that it’s so much.”
Consumers are paying higher prices for a lot of things these days, from used cars and gasoline to groceries and plane tickets. The Consumer Price Index jumped 5.4% in June compared with the same month last year, the largest 12-month increase since 2008, according to the U.S. Labor Department.
Rising inflation expectations are the real worry for the economy
The inflation is a result of the rapid reopening of the economy, experts said. In some cases, such businesses as hotels, airlines, and rental car companies are normalizing their prices after slashing them during the pandemic. In others, the supply side of the economy can’t keep up with the surge in consumer demand because the coronavirus has disrupted supply chains.
“It’s Econ 101. More demand than supply means higher prices.” said Mark Zandi, chief economist at Moody’s Analytics. “It’s uncomfortable. It’s painful. But it’s typical. Same thing happens after every recession.”
The Consumer Price Index measures the average change over time in prices paid by consumers for a range of goods and services, including clothes, groceries, electronics, and restaurant meals. It increased 0.9% from May to June.
Prices for used cars and trucks rose 10.5% last month, accounting for one-third of the overall index, the department said. June was the third straight month that used-vehicle prices rose sharply.
Automakers can’t get enough semiconductor chips to produce cars, causing a supply shortage of vehicles. Because consumers can’t get new cars, demand for used vehicles has increased, said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers. But for dealerships, the biggest source of used vehicles is trade-ins on new cars, so the supply of used vehicles is down, too. “It’s kind of a perfect storm,” Appleton said.
The index for airline ticket prices continued to increase, rising 2.7% in June as more consumers traveled in the spring and early summer. Delta Air Lines president Glen Hauenstein said Wednesday that demand for air travel came back at an “accelerated rate” from April through June.
“Bookings in domestic and short-haul Latin leisure markets recovered to nearly 90% of 2019 levels,” he said on Delta’s quarterly earnings call. Business travel is also picking up, with nearly 95% of Delta’s corporate accounts booking travel in June.
Even though airfare is rising broadly, there are good deals to be found — particularly on flights to city destinations, rather than the outdoorsy locales that have been popular during the pandemic.
“The city is where it’s at this summer for deals,” said Mel Dohmen, senior brand manager with CheapTickets. “Cities across the U.S. have had different reopening schedules coming out of the pandemic, which means a lot of affordability still for travelers and available inventory.”
CheapTickets compared price points for summer 2021 travel with pre-pandemic summer travel in 2019, and found that it’s now 30% cheaper to fly to destinations such as Miami, Chicago and Los Angeles. It’s 25% cheaper to fly to such cities as Detroit, Minneapolis, and Atlanta this summer than it was two years ago, and 20% cheaper to book a flight to Phoenix, New Orleans and Las Vegas, according to the budget travel brand.
Across the U.S., gas prices rose 2.5% over last month, the department reported. Gas prices in and around Philadelphia have also gone up — and they’re not backing down, said Kathleen Zinszer, AAA Mid-Atlantic spokesperson.
The average gas price on Wednesday in the five counties was $3.21 a gallon, compared with $3.16 a month ago, and $2.42 a year ago, according to AAA. The price of crude oil, which rose 55% between Jan. 4 and Tuesday, along with the demand for gasoline, is contributing to rising prices at the pump, she said.
“Philadelphia-area drivers are paying about 80 cents more than they were one year ago and close to 30 cents more than in 2019,” Zinszer said.
Zandi, the Moody’s economist, said the sharp rise in inflation should be temporary, noting the price increases that occurred after previous recessions. “If history is a guide — I think it’s a good one — I think we don’t have anything to worry about here.”
But for now, the price hikes are hurting consumers who are still struggling financially. Dana Spatz was laid off from her job at a food services company in May and now makes much less money while bartending part time and collecting unemployment benefits. Making matters worse, the 30-year-old from South Philadelphia has seen higher prices for essentials. She said she’s now buying cheaper gas in New Jersey and using more coupons for groceries.
“I’m just doing whatever I can, any little ways that I can cut corners to try to save money,” said Spatz, who was a food services director for a local university. “A couple dollars here or a couple dollars there really adds up.”
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