Inflation Still Nugatory

The status of a potential inflation is clear.

A few die-hard anti-Fed types are probably still expecting a round of inflation for the U.S. economy because of the intense intervention by the central bank during the years since the recession, but for the most part there’s not much fear of inflation these days. And for good reason: there’s still not much inflation, despite spells of stagnation that the economy’s suffered lately (such as the first quarter of this year). Stagflation, in short, is as much a relic of the 1970s as 8-track tapes. There’s no consensus on why that should be, but in any case the CPI keeps telling us that it’s so.

The Consumer Price Index for All Urban Consumers, which is headline metric for U.S. inflation, increased 0.1 percent in April, according to the Bureau of Labor Statistics on Friday. Prices for energy were down, while food prices didn’t change. The BLS’s various indexes tracking prices for gasoline, natural gas, and fuel oil all dropped, but electricity was neither higher nor lower. Food at home was cheaper for the second month in a row, offsetting an increase in price of food away from home. The BLS’s index tracking the price of shelter rose, as did the indexes for medical care, household furnishings, used cars and trucks, and new vehicles. On the other hand, the indexes for apparel and airline fares declined in April.

All that’s pretty low, but it’s also only one month. Over the last 12 months, the all items index declined 0.2 percent. The decline was spurred by the fall in energy prices, down 19.4 percent over the last 12 months, with all its major components declining except electricity. The BLS’s food index rose 2 percent over the last year, and the price for all items without food and energy rose 1.8 percent. There’s been a modicum of inflation, in other words, with prices falling on a commodity — energy, specifically gasoline — that potential translates into higher consumer spending in other areas that benefit certain property types.

Such as travel-related expenditures, which benefit the hospitality sector and (indirectly) retail. Going into the Memorial Day weekend, AAA predicted that 37.2 million Americans would travel 50 miles or more from home during the weekend, a 4.7 percent increase from last year, and the highest travel volume for the beginning-of-summer holiday in 10 years. Cheap gas is one reason: the organization also noted that compared with Memorial Day weekend in 2014, gas averages fully a dollar less per gallon now. The benefit seems to be accruing to the hospitality industry as well. Last week, STR reported that the U.S. hotel RevPAR’s up almost 50% since 2009, and that occupancies are posed to be a record high for 2015.