Inflation hits 8.5%, as gas, travel-related expenses see sharp rises affecting businesses

RALEIGH, N.C. (WTVD) -- A new report from the Department of Labor showed the consumer price index increased by 8.5% over the past year, the sharpest annual increase in more than 40 years.

While rising costs are largely felt across the board, certain sectors and industries are more impacted by rising costs. Gasoline prices increased by 18.3% between February and March, and are up 48% on the year; a number of factors go into the dramatic rise in pricing, from more people traveling and driving as COVID metrics have improved to the ongoing conflict in Ukraine.

Other notable rises during the past month include airfare, which was up 10.7% and hotels and motels, up 3.7%. Groceries prices ticked up by 1.5% over the month, and 10% on the year; all three are affected by higher energy costs.

"Rising airfares where airlines are raising fares because of energy. Rising transportation costs for truckers and how that feeds through into other goods prices. Rising taxi fares or car fares - rideshare companies are putting on an extra energy fee," said Gerald Cohen, Chief Economist at the Kenan Institute of Private Enterprise, a nonpartisan think tank affiliated with UNC's Kenan-Flager School of Business. "Petroleum is a big input in plastics. Natural gas is an input in fertilizer. So those will likely take longer to see the impact, but those things are still feeding through."

The higher costs come as unemployment rates have returned to pre-pandemic levels, and most restrictions and capacity limitations have been loosened. For Brewgaloo organizer Jennifer Martin, the hope is that latter will lead to bigger crowds for Brewgaloo in downtown Raleigh next weekend.

"We've actually expanded Friday night's event. So instead of just one block, we're doing two blocks to make it even bigger," said Martin, who also serves as the Executive Director of Shop Local Raleigh.

After drawing 50,000 in 2019, the festival was cancelled in 2020, and scaled back in 2021, when 25,000 people attended. Martin anticipates 35-40,000 people will show up this year, and while ticket prices will remain the same, they are facing increased costs.

"Everything has gone up this year. And we say everything, we mean everything. Our cups increased 70 cents per cup. So when you're placing an order for 15, 20, 25,000 cups, that's a significant increase that we're seeing. We've already locked in cup pricing for our fall festival just due to the high increase of prices going up," Martin said.

To try and offset the rising costs, Martin said they are working to secure more sponsors or alternate revenue streams while acknowledging the cost to get in will likely increase in the future.

"We're seeing increase in product costs, in insurance - our insurance went up another $2,000. Ticketing, the paper printing cost went up. Everything that you can think involved in the festival, we've seen an increase," said Martin, who remained optimistic that the increased costs would be worthwhile to draw people back.

As it has in recent years, ticket prices are higher day of, so Martin encouraged people to purchase beforehand.

More than 110 North Carolina brewers will travel to Fayetteville Street for the festival, which will also include food trucks and local businesses setting up tents. Lori Herndon, the owner of Trash Talk Food Truck, will be attending.

"We're going to be ready for it, and just ready to see everybody and get to a feeling of normalcy. We look forward to participating. That's one of our biggest events that we do every year. We make sure we're fully staffed, and fully (stocked) with food," said owner Lori Herndon.

Herndon said food trucks, which are more reliant on energy costs than brick-and-mortar restaurants, have faced unique challenges.

"Making sure that once we get to an event that we not only break even but can make a profit after paying for the gas, the propane, the gas for the generator, paying our staff, food costs," said Herndon while discussing locations they choose to set up.

She also owns Mustang Charlie's Diner (Presented by Peak City Hots) in Apex and said both have been impacted by rising food costs.

"Unfortunately there's a lot of supply constraints from week to week. Every week is something different. Chicken may be an increase in price (one week), beef may be another increase in price. Recently it's been eggs, oil, it's a lot of products that unfortunately we need to continue our business, so we've had to do what we can. My prices at the restaurant and food truck have increased by about seven percent, but customers understand," Herndon said.

Cohen explained wages have not kept up with rising inflation in most sectors.

"This is one of the challenges for policymakers who both want wages to keep up with inflation, but the problem is you can get this wage-price cycle, so higher wages mean that companies are going to pass those on to consumers, and this is one of the dangers that you saw in inflationary periods in the '70s and early '80s," Cohen explained.

He added the ability to work remotely does not exist for many lower-wage professions, meaning sharp increases in fuel prices can play an outsized role on families already struggling.

"It's much harder for them, to get in a car and have to commute, it's a much larger share of their spending and so it makes these challenges even more difficult," Cohen said.

Cohen, who served in the US Department of Treasury during President Obama's administration, disagreed with some analysts' suggestion to cut the federal gas tax, believing there are more targeted measures that can aid those most in need.

"Expanding programs that are going to help lower-income households like the earned income tax credit, like a child tax credit, are going to be beneficial," said Cohen.

He did point to one recent trend that could be a positive sign moving forward.

"Energy prices have fallen over the past few weeks, so that will actually put some downward pressure on the inflation numbers next month," Cohen noted.