FAU Economists: Elevated Inflation Might Enhance Summer season Journey Prices

Elevated inflation doesn’t bode properly for vacationers planning summer time holidays this yr, in keeping with two economists at Florida Atlantic University.

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Elevated inflation doesn’t bode properly for vacationers planning summer time holidays this yr, in keeping with two economists at Florida Atlantic University.

Despite a decline from the prior month, the April replace confirmed that inflation stays properly above the Federal Reserve’s 2% goal. The Personal Consumption Expenditures Price Index (PCEPI), the Fed’s most well-liked measure of inflation, grew at an annualized price of 4.9% in April.

“For households planning summer vacations, this is not good news,” mentioned Eric Van Tassel, Ph.D., affiliate professor of economics in FAU’s College of Business. “Some of the fastest-growing price categories included food services and accommodations, housing and utilities, as well as recreation services.”

The PCEPI grew at an annualized price of 4.8% during the last six months and three.8% during the last yr.

Meanwhile, whereas core inflation declined barely, it remained elevated as properly. Core PCEPI grew at an annualized price of two.9% in April, down from 3.6% in March. It grew at an annualized price of three.8% during the last six months and three.3% during the last yr.

“These types of temporary supply shocks generally do not have a persistent effect on prices, giving analysts reason to believe the inflationary effects may prove largely transitory,” Van Tassel mentioned.

Nominal spending stays a key driver of elevated inflation, famous William J. Luther, Ph.D., affiliate professor of economics in FAU’s College of Business. Nominal spending grew 5.9% from the primary quarter of 2025 to the primary quarter of 2026. With extra money chasing roughly the identical quantity of products and companies, stronger nominal spending development has contributed to increased inflation.

While many observers level to tariffs and geopolitical conflicts as the first drivers of rising costs, Luther mentioned the info recommend demand-side pressures proceed to play a major position.

“It is tempting to attribute the increase in inflation to the salient supply shocks we have experienced over the last year or so, including the tariffs levied last year and the conflict in the Middle East beginning earlier this year,” Luther mentioned. “But here’s the thing: constrained supplies do not push nominal spending growth higher. Rather, faster nominal spending growth is the telltale sign of a demand-side problem.”

Although inflation has moderated from its peak, each economists famous that value pressures stay above the Federal Reserve’s goal and proceed to have an effect on shoppers’ buying energy. As households make spending selections for summer time journey and different discretionary actions, elevated prices for lodging, eating and recreation are more likely to stay a problem.

-FAU-