LI hit hard by inflation in June but better days may be ahead, say experts

Consumer prices in the metropolitan area rose an eye-popping 6.7% in June compared with a year earlier, though future increases may be smaller as higher interest rates force consumers and businesses to spend less, experts said.

The federal Bureau of Labor Statistics reported on Wednesday that its consumer price index for the 25-county region that includes Long Island increased last month at the fastest rate, year over year, since August 1990.

The index’s rise was largely due to the cost of gasoline and other energy, according to the bureau’s regional commissioner, William J. Sibley.

Pump prices were up 60.2% in June compared with a year earlier. That’s the biggest annual increase since April 1980.

The cost of electricity rose 11.8%, year over year, while natural gas was up 29.9%.

Grocery prices climbed 10.1% overall last month compared with June 2021. But some categories had bigger year-over-year increases, including nonalcoholic beverages, up 12%, and cereals and bakery items, up 16%.

John A. Rizzo, an economist and Stony Brook University professor, said inflation may have peaked in June because interest-rate hikes by the Federal Reserve are now reducing the cost of some commodities.

“Commodity prices in a number of areas, including food and oil, are coming down because of the anticipation of an [economic] slowdown due to higher interest rates…I think we may be hitting the peak right now” of consumer prices, he said. “I anticipate next month’s inflation reading to be a bit better.”

Rizzo and others predicted the Fed would again raise interest rates later this month, which will further slow economic growth as consumers curb their spending. If they cut back too much, the economy will fall into recession because 70% of economic activity is derived from consumer spending.

“What matters is getting a handle on inflation,” Rizzo said. “If we have two consecutive quarters of negative economic growth, which is a recession, that’s less damaging than out-of-control inflation.”

Still, Long Islanders are feeling pinched and making changes in their spending.

Kathy O’Connor, a retiree in Long Beach, said she has increased the number of grocery stores that she visits each week, from one to three.

“I used to just go to Stop & Shop,” said O’Connor, 67, outside the Long Beach post office, which is across the street from the supermarket. “But now, I scan the circulars and go for the specials at Lidl [in East Rockaway] and King Kullen [in Island Park] as well as Stop & Shop. I’m trying to stretch my dollars.”

Outside the Walmart store in Valley Stream, Mayra Portillo said she now goes grocery shopping twice a month instead of every week because prices have soared.

“I used to buy red meat” until the cost went up, said Portillo, of Valley Stream. In her shopping cart on Wednesday, she had chicken, laundry detergent, oil and a cooking pot.

Pat Doodnath, of Ozone Park, Queens, said she has resorted to buying store brands because they generally come with lower prices.

For recreation, “I don’t travel as much,” she said.

The price index for the metro area increased at a slower rate than the national index because residential rents are rising faster elsewhere, and New Yorkers spend less on transportation, according to Bruce Bergman, a regional economist in the bureau’s Manhattan office.

Consumers aren't the only ones affected by inflation. Some small businesses are struggling.

The leaders of two chambers of commerce on Long Island said the restaurant industry has been hit hard, with some longtime eateries shutting their doors permanently in the past month.

“Inflation is immense when it comes to food…Almost everything is 50% higher than it was a year ago,” said Zeshan Hamid, owner of Shaheen Caterers & Event Planners and a partner in Shaheen Restaurant, both in Hicksville. “You cannot just automatically raise your prices by 50% [to the consumer] so it cuts down on the profit.”

Hamid, who also is chairman of the 200-member New York South Asian Chamber of Commerce, said all types of small businesses are impacted by rising gasoline prices as producers and transportation companies pass along their higher costs.

“You’re seeing restaurants close and others tread water,” he said.

Phil Andrews, president of the 400-member Long Island African American Chamber of Commerce, agreed, saying, “Black-owned businesses were already strained before the pandemic, and that increased during the pandemic. Now, with inflation, it’s putting us even further behind.”

With Keldy Ortiz

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.