If you ever wanted more evidence that the so-called "inflation index" (CPI) was rigged to the degree that it is an outright fraud you need only look around.
I've known and pointed this out, particularly where it comes from in the methodology. The crazy train of "Owners Equivalent Rent" is one of the largest elements of it, yet not the only one.
But recent travel underlined it in bold print when I went back to my "old stomping grounds" for a few days.
First, lodging was up some 40% over equivalent week blocks and of course the county bed tax is on top of that as a percentage, so the area is "flush" with plenty of tourism development money. In fact they're so flush they don't have allocations for it. Gee, go figure, given that the base price on which the tax is charged has gone up 40% and thus so has the tax.
Next up one of the arguably-best places to go get a steak or other good food in the area, not a chain, had massive increases in menu prices. I was blown away at the changes. What also struck me instantly was that virtually the entire wait staff were clearly not locals as they had been for the entire 20 years I lived there and the first couple of the pandemic; they were likely all J-1 visa folks. The service was on-point and so was the quality of the food -- but the price, well...... what was a $70 experience was north of $100 and then to top it off the local city had taken what were $1/hr municipal parking lots and turned them into $15/flat rate for the day which utterly screws anyone coming into there who just wants to get a couple of beers or dinner. That is an effective 15% city tax on top of your dining bill and sales tax for two and if you just wanted to come get a couple of beers the total price has now doubled. That is likely enough to shut it off -- if not immediately, when people start thinking about it, and they will.
The thing about it is that thus far people are paying the ask as the place was jammed to the rafters. Now to be fair it usually is -- its known to be the place to go for a good experience, excellent food and on-point service, all of which is still delivered. But at what price?
The local really good coffee shop that used to have nice double-shots of Espresso for $3 now wants $4. That's a 33% increase. In less than two years. Yes, the coffee there is very good as they know what they're doing. But the price.... well...
Of course there isn't any reason for any of the parties involved in this to back off from it since they're still getting the business.
Last night a place that I really like managed to trip my "nope!" marker for what they wanted for a single beer. I bought one -- but it is unlikely I'll go there very often at all. Yes, I have it, but that's not the point -- once you start to approach where I can buy a four or six-pack of craft beer in the grocery store for a single pint glass with a reasonable tip you're in the danger zone, and they got there.
Will this "hold" or break the consumer? I don't know; for right now it appears to be holding. But I'm skeptical that it can and will continue for long as it is absolutely clear that the labor force is not being compensated at anywhere near that rate of increase. The shift away from nearly-all local help to J-1s was in your face glaring and instantly obvious to someone who had patronized this establishment for twenty years, and those folks are probably ok with being crammed 10 to a one-bedroom apartment and sleeping on cots. The local residents can't afford to live there on that sort of wage and thus they get "outcompeted" by the J-1s -- which of course we cheer on as "legal immigration" and "guest workers" while ignoring the fact that this means those former workers, and others in the same skill category, can't afford to dine or drink there anymore either.
Narrowing your customer base like this by pricing out the local residents eventually kills you. Not immediately to be sure, and of course the "success stories" will breed copycats with the same sort of extortionate pricing.
It is what it is in America today, of course -- but I think we should be paying attention to this in terms of trends and what we can expect in the coming months and years. None of it, from where I sit, looks good at all on a macro economic level a year or two down the road.