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5 Items Whose Prices Inflate Quickly and Deflate Slowly

As inflation continues to surge, economists call the phenomenon 'rockets and feathers'

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The Consumer Price Index (CPI), the government’s main gauge of inflation, rose a staggering 9.1 percent in June from where it stood a year earlier, according to the Bureau of Labor Statistics (BLS).

You may have noticed that during the recent bout of inflation, prices have risen quickly — to the point where a gallon of gas could jump up 10 cents or more each day. You may also have noticed that gas prices inch down very, very slowly.

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Economists have a term for this: “rockets and feathers.” Prices often soar like a rocket and flutter down like a feather. And the prices of some things — typically labor-intensive bills like auto repair — never seem to fall at all. Why is this, and what bills can we expect to fall very slowly, or perhaps never?

Rockets and feathers

Economists like to use gas prices as an example of the rockets and feathers phenomenon, in part because people see gas prices nearly every day, and because the price of gasoline largely tracks the price of oil. Crude oil prices account for 59 percent of the cost of a gallon of gas. By and large, oil and gas prices go in the same direction — but gas prices go up more quickly and down more slowly.

Here’s an example. The average price of regular gasoline started the year at $3.15, according to the Federal Reserve. It peaked at a record $5.02 a gallon on June 14, according to AAA, a 60 percent increase. The price of a barrel of oil increased 56 percent from the start of the year to its March 8 peak of $123.64. Rockets!

A barrel of oil has seen its price tumble to $104.09, a 19 percent decline. Gasoline? Down 7 percent. Feathers.

Why the lag? Three reasons, in the case of gasoline.

  • Demand. “July is brisk for demand,” says Tom Kloza, global head of energy analysis for the Oil Price Information Service. “People feel as though they’re entitled to take vacations, whether they need to pay, you know, $5 a gallon or not.” 
  • Air travel. As thousands of flights get canceled each day, driving has become more and more attractive to travelers. “It’s a nightmare,” Kloza says. People will consider driving 800 miles before having to endure long lines at the airport and delayed flights.
  • Opportunity. For the energy companies, that is. “Say you’re running a hoagie shop in a vacation area,” Kloza says. “And all of a sudden prices for meat and cheese and bread fall 20 percent. But it’s July and it’s high season. There’s no compelling reason to cut prices. You make hay while the sun shines.”

Flexible vs. sticky prices

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Economists call the price of some goods and services “flexible,” meaning they can move up and down a lot, while others, like water, sewer and trash collection services, are “sticky.” They just don’t change often. (And when they do, they tend not to go back down.) Here are the five most flexible components of the Consumer Price Index, according to the Federal Reserve Bank of Atlanta:

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  1. Motor fuel. As we’ve all seen, the price of gasoline, diesel and other motor fuels can soar (and fall) dramatically. In one remarkable week in April 2020, the price of a barrel of oil fell to -$36.98, meaning that sellers in theory had to pay buyers $36.98 to get oil off their hands. (This was in the futures market, where the normal laws of economics don’t always apply.) For the 12 months ended June 30, motor fuel rose 60.2 percent. 
  2. Car and truck rentals. Car rental companies cut back their fleets during the COVID pandemic and have been slow to replenish them. And not surprisingly, rental prices tend to rise in the summer and during holidays, then fall afterward. “We don’t view inflation as necessarily a bad thing for us, as this creates more discipline across the industry in terms of pricing and asset allocation,” Hertz Chief Financial Officer Kenny Cheung said during an investor meeting in April. Car and truck rental prices have fallen 7.7 percent in the past 12 months, after soaring 15.9 percent in 2021.
  3. Fresh fruit and vegetables. The grapes you eat in February probably come from Chile or South Africa. If you’re buying zucchini in July, however, you’re paying very little — or nibbling it for free from your home garden. The price of fresh fruit and vegetables has risen 7 percent in the past 12 months.
  4. Gas and electricity. You need an energy source to make electricity, and much of the electricity in the United States is made from natural gas. As with oil, natural gas prices depend on a bundle of factors, from weather to industrial and agricultural demand. (Producing most fertilizer requires prodigious amounts of natural gas.) The price of natural gas has gained 38.4 percent in the past 12 months.
  5. Meats, poultry, fish and eggs. A blistering hot summer or an arctic cold winter can affect the price of these staples in just a few weeks. The price of meats, poultry, fish and eggs has gained 11.7 percent in the past 12 months.
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Sticky prices

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Some components of the CPI are nearly glacial in their increase, and many of them are either labor-intensive or involve government action. The five CPI components that rise least often:

  • Motor vehicle fees. Your car registration probably doesn’t increase in price much, mainly because it would generate ill will from the public. The cost of motor vehicle fees has risen 1.5 percent in the past 12 months.
  • Water, sewer and trash collection services. Not all of these services are run by the government, but their prices tend to rise slowly. These fees have risen 4.4 percent in the past 12 months.
  • Medical care services. The BLS describes these as professional medical services, hospital services, nursing home services, adult day care and health insurance. This category can include some services that rise faster than others: Your dentist may raise prices faster than the adult day care center. Combined, these have risen 4.8 percent in the past 12 months.
  • Education. Surprisingly, the costs of tuition, textbooks and day care are relatively stable of late. They rose 2.7 percent in the past 12 months.
  • Alcoholic beverages. You can spend a lot on craft beer and Kentucky bourbon, but most alcohol prices rise relatively slowly, especially those made to be imbibed at home. In the past 12 months, alcoholic beverages have risen 4 percent.
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