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Experts explain the effect of the rapid reopening of the economy

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A few years ago, Yvonne Ferguson-Hardin had no difficulty finding a used car for her eldest daughter. This year, the car races for her youngest daughter were more difficult. And foreigner.

An online salesperson has never shown up to a meeting. Another was actually selling small 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 look at the price in relation to the miles. It’s just really, really overpriced, ”said Ferguson-Hardin, 56, of Philadelphia.

Consumers these days pay higher prices for many things, from used cars and gasoline to groceries and airline tickets. The consumer price index jumped 5.4 percent in June from the same month last year, the biggest 12-month increase since 2008, according to the US Department of Labor.

Inflation is the result of the economy reopening quickly, experts say. In some cases, companies such as hotels, airlines and car rental companies are standardizing their prices after cutting them during the pandemic. In others, the supply side of the economy cannot keep up with rising consumer demand as 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 is typical. The same thing happens after every recession.

The Consumer Price Index measures the average change over time in the prices consumers pay for a range of goods and services, including clothing, groceries, electronics, and restaurant meals. It rose 0.9% from May to June.

Prices for used cars and trucks rose 10.5% last month, representing a third of the overall index, the department said. June was the third month in a row that prices for used vehicles rose sharply.

Automakers cannot get enough semiconductor chips to produce cars, causing a shortage of vehicles. Because consumers cannot afford new cars, the demand for used vehicles has increased, said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers. But for dealers, the biggest source of used vehicles is the new car trade-in, so the supply of used vehicles is also declining. “It’s kind of a perfect storm,” Appleton said.

The airline ticket price index continued to rise, rising 2.7% in June as more consumers traveled in the spring and early summer. Delta Air Lines chairman Glen Hauenstein said Wednesday demand for air travel returned to an “accelerated rate” from April to June.

Even as air fares are rising widely, there are some great deals to be found – especially on flights to urban destinations, rather than the outdoor spots that have been popular during the pandemic.

“The city is where it is this summer for deals,” said Mel Dohmen, senior brand manager at CheapTickets. “Cities in the United States have had different reopening times in the wake of the pandemic, which still means a lot of affordability for travelers and available inventory.”

CheapTickets compared the prices of 2021 summer travel with pre-pandemic summer travel in 2019, and found that it is now 30% cheaper to fly to destinations such as Miami, Chicago and Los Angeles. It’s 25% cheaper to fly to cities like 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 brand. budget travel.

In the United States, gas prices are up 2.5% from last month, the department reported.

Zandi said the sharp rise in inflation is expected to be temporary, noting price increases that have occurred after previous recessions. “If history is a guide – I think it’s a good guide – I think we have nothing to fear here.”


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