Americans have been paying higher prices for months – will the Delta variant finally put a stop to the price hike?
Is Delta going to be a game-changer?
The highly transmissible delta variant of COVID-19 threatens to dampen economic recovery after the pandemic, economists say. This has prompted companies to push back office return dates and schools to reconsider distance learning, and encouraged employers to institute face mask and vaccine mandates.
More lockdowns and restrictions on travel and business don’t seem imminent, but the variant – which the Centers for Disease Control and Prevention says now accounts for more than 93% of all COVID-19 cases in the United States – could it lead consumers to pay lower prices for goods and services?
Before the delta accounted for the majority of cases and after millions of Americans got vaccinated, many people began to gain insight into how they might feel after the pandemic. Millions of people boarded planes, took road trips, dined in restaurants, went to concerts and in-person sports matches for the first time in over a year and a half.
As a result of pent-up demand, consumers pay 5.4% more than last year for all goods and services, according to the June consumer price index. Used and rental cars, airline tickets and hotel rates, which saw the largest month-over-month price increases, also contributed to the inflation.
Frontier Airlines sees “a slowdown in the level of reservations compared to seasonal norms which we believe is directly linked to the increase in the number of COVID-19 cases associated with the Delta variant”
In Los Angeles, where indoor mask warrants were imposed last month regardless of vaccination status, indoor restaurant visits were 17% lower in the week ending Aug. 1 with compared to the same period in 2019, the Wall Street Journal reported, citing foot traffic data. analysis company Placer.ai.
Frontier Airlines ULCC,
also finds “a slowdown in the level of bookings from seasonal norms which we believe is directly related to the increase in the number of COVID-19 cases associated with the Delta variant,” the company said in its report on quarterly results from August 4. (The company did not respond to a request for comment.)
If Americans reconsidered their travel, restaurant meals, and / or lifestyle changes due to concerns about the variant, “in the near future it would ease inflation issues as it would mean less demand,” Mark Zandi, chief economist at Moody’s Analytics, told CNN.
“For some reason, Americans don’t seem to react strongly to the news, at least not enough to have an impact on prices.”
Indeed, several economists, including Federal Reserve Chairman Jerome Powell, have said prices will remain high for the next few months but moderate once Americans adjust to the new normal. He also cited pent-up consumer demand and supply shortages for some materials.
So far, the delta has not caused a sudden change in behavior, said David Mericle, chief US economist at Goldman Sachs GS,
“For some reason, Americans don’t seem to react strongly to the news, at least not enough to impact prices,” he said, based on high-frequency transaction data analyzed by his team. .
But if COVID cases continue to rise, Americans are likely to cut back on travel and dining out, said Kevin Cummins, chief U.S. economist at NatWest Markets. It would help “remove a bit of the reopening and pushing foam that we’ve seen recently that really led to this temporary supply issue,” he said.
The Bureau of Labor Statistics is expected to release CPI data for July on Wednesday. Economists forecast a price increase of 0.5% for the month. However, Cummins and Mericle said it would still be too early to determine from this report whether or how the Delta variant is affecting overall prices in the United States.