With a recent surge in inflation expected to continue through the year, Connecticut businesses and consumers are bracing for what could be a costly holiday season as prices remain elevated in stores, restaurants, and at the pumps.
In a report last week, the U.S. Bureau of Labor Statistics reported that consumer prices increased by 6.2% this October over where they were a year earlier. It was the largest such increase since 1990.
Leah Hartman, coordinator of the University of New Haven’s finance program, said the recent increase in inflation is a side effect of expanding economic demand as the world begins to emerge from the pandemic coupled with global supply disruptions caused by the pandemic.
“It’s a bottleneck right now,” Hartman said Monday. “We have a constraint because there may be containers, ships sitting out there but no dock workers or truckers to take the goods and distribute. I think through the holiday season, we’ll see that still be pretty high but I do think that as manufacturing has reopened and gets back to business, as this global supply constraint eases, then we’ll see inflation [return to a more normal range].”
In the meantime, limited supplies and higher prices complicate the supply chain for Connecticut businesses. Eric Gjede, vice president of government affairs for the Connecticut Business and Industry Association, said it has been particularly difficult for retailers and manufacturers.
“The biggest impact to Connecticut businesses is the cost of making goods goes up quite a bit,” Gjede said Friday. “We’ve been hearing from some of our manufacturers that it’s becoming increasingly difficult because of supply chain issues to get products and when they can get those materials or products, they’re more expensive.”
Restaurants are also finding it more difficult to offer consistent menus and schedules as prices fluctuate and supplies are more difficult to find in some cases. Scott Dolch, executive director of the CT Restaurant Association, said the issues have complicated business for an industry which was dealt heavy losses during the pandemic and continues to struggle with staffing shortages. Dolch estimated the industry was still about 23,000 workers short of pre-pandemic staffing levels.
“Our restaurants are making decisions on a daily basis about how they’re going to be run that day or that week based on challenges with pricing and supply chain,” Dolch said. Although the pandemic had already demanded flexibility from restaurant owners, the inflation challenges have added to their stress, he said. “They’re being run in 8 million different directions, more so than ever because they’re trying to make up for 20 months of loss.”
Hartman said analysts expected the Bureau of Labor Statistics to report an increase in inflation last week, though maybe not one as startling as 6.2%. Still, she said it was likely the monthly report would eventually pale in comparison to the inflation the country experienced in the mid 1970s through early 1980s, when it remained above 6% for years on end and got as high as 13% in 1979. She said she expected the current surge to subside by the end of the first quarter of 2022.
In the near term, Hartman said the rising costs would likely have the greatest impact on lower-income families.
“I mean, we’re all feeling it at the pump and we see it in the grocery stores,” she said. “When you have a spike in inflation, when it’s food in energy, the folks at the lower income levels certainly feel that pinch because food and energy are a bigger proportion of their family budgets. They need gasoline in their cars to go to work and they need to put food on their table.”
Although inflation can not be addressed by Connecticut policymakers, Gjede said the state was already an expensive place to live and do business and lawmakers should find ways to reduce that burden by cutting taxes.
“Connecticut, especially going into the next legislative session, we have to start addressing our affordability issue in this state and that means the cost of living here,” he said. “We’ve got to start looking at some sort of tax relief.”
Last week, Gov. Ned Lamont said he was considering at least a form of tax relief. Lamont, who has recently confirmed his plans to run for reelection, told reporters his administration was looking at ways to restore a property tax credit for low and middle income earners. Lamont campaigned on the issue in 2018 but has been so far unable to put the tax credit back in the budget.