Inflation hasn't slowed as much as expected, hitting Long Islanders' wallets

From housing to electricity to groceries, Long Island households are facing higher prices in 2024, as above-normal inflation sticks around longer than expected.

Nationwide, consumer prices increased 3.5% in March compared with a year earlier, according to the most recent data from the federal Bureau of Labor Statistics. Locally, prices rose 3.4% in the 25-county New York metro region that includes Long Island, New York City and suburbs in New Jersey and Pennsylvania.

Climbing prices have led local shoppers like Rena Fayad, 44, to check multiple stores for sales on different items instead of getting everything at one place, she said last week while shopping at Holiday Farms in Franklin Square. She said her family’s grocery costs are more than double what they were before the COVID-19 pandemic started in March 2020. 

“You feel it," said Fayad, who was shopping with her husband and two sons. "A $50 shopping [trip] is now $125. I mean, it’s outrageous. I shop twice a week, so I spend $1,200 a month just on groceries.” 

While inflation has slowed from its peak, prices are still growing faster than policymakers want. The Federal Reserve aims to keep inflation to 2% in the long run to achieve its dual mandate from Congress to attain maximum employment and stable prices.

But in the years after the pandemic, inflation spiked, with the Consumer Price Index reaching 9.1% in June 2022, the highest year-over-year increase since 1981.

Starting in 2022, the Fed raised its benchmark interest rate 11 times with the goal of slowing inflation by making it more expensive to borrow money. Those changes affect all types of lending, including credit cards, auto loans and mortgages.

On Wednesday, the Fed announced it would maintain its benchmark interest rate at its current range of 5.25% to 5.5% given the “lack of further progress” in lowering inflation, Fed Chair Jerome Powell said. He said high rates of inflation create hardship, particularly for lower-income people, by reducing purchasing power for essential items, such as food, housing and transportation.

"Inflation has eased substantially over the past year while the labor market has remained strong and that’s very good news,” Powell said. “But inflation is still too high, further progress in bringing it down is not assured, and the path forward is uncertain.” 

Locally, housing costs have pushed inflation higher. The cost of shelter, which measures housing costs excluding utilities, increased 4.9% in March compared with the previous year.

Shelter costs have a significant effect on inflation because they make up nearly 40% of the basket of goods and services used to track prices.

“Overall price increases in the New York metropolitan area have decelerated, but prices for shelter, even though they’ve come down from their highs, still remain elevated,” said Bruce Bergman, an economist who covers the region including Long Island for the Bureau of Labor Statistics.

Still, some categories have started to trend lower. Prices for apparel fell 3.7%, dairy products fell 1.6% and used cars and trucks fell 1.4% in March compared with a year ago in the New York metro area, according to BLS.

Even as prices overall have begun to rise at a slower pace than a few years ago, the hikes from 2021-22 won't reverse themselves. Consu mer prices “will not return to their pre-pandemic levels," said John A. Rizzo, an economist and Stony Brook University professor.

Moreover, consumers’ purchasing power will be less until wages catch up to inflation, which has happened before.

“In the immediate years following the pandemic real wages — adjusted for inflation — actually declined below pre-pandemic levels … But as the economy continues to improve, this trend will likely reverse and real earnings will rise again,” he said.

Rizzo and others said consumers are cutting back on discretionary purchases, but so far economic growth has remained strong. If the inflation rate slows to the point where the Federal Reserve feels comfortable in cutting interest rates, “this will also help consumers by lowering the cost of borrowing,” Rizzo said in an interview.

Here are a few categories where Long Islanders are seeing higher prices:

Electricity

The New York region has broadly seen big increases in the price of electricity over the past year.

The average price of power in the 25-county New York metro region increased by 19.4% in March from the same month a year ago, according to recent Consumer Price Index data.

The average monthly electricity bill for Islanders is projected to increase by $20 this year — an 11.6% increase from 2023 — according to the Long Island Power Authority’s 2024 operating budget. Typical residential bills are estimated to be $186.71 a month this year, an increase of $19.43 from the average $167.28 bill in 2023.

Despite the broader increases for the year, LIPA says it has been able to control price volatility for Long Islanders better than other power providers in the state.

“Year by year, we are making improvements and showing tangible results to provide the clean, reliable, and affordable electricity our customers deserve,” LIPA said in a statement.

For customers like Cynthia Rainis, 59, of Lindenhurst, the price of power, especially during the summer months, has been baffling.

Rainis, who said her bill outside of the summer typically runs around $200 to $250 for her two-story home, was confused when she saw her electric bill climb to over $1,000 in August 2022. It was $729 last August, she said. 

“It didn’t feel like a reasonable amount to me,” said Rainis, who moved to Long Island in 2020 from a rental in Richmond Hill, Queens. While she said she understands that using power in the summer costs more, especially with the increased AC and the use of her pool’s cleaning system, she was surprised to see her bill be so high.

Rainis said last year PSEG Long Island provided a free energy usage audit in hopes of finding a culprit. She said no significant changes could be made — she already owns a smart thermostat and energy efficient appliances.

“I just don’t see where the increase in price is coming from,” she said.

Considering the cost of power, PSEG makes several recommendations on saving power.

“There are ways to save a significant amount of electricity,” said Mike Voltz, director of energy efficiency at PSEG.

Among his recommendations: switching from standard to LED lightbulbs throughout the home; investing in a smart thermostat to better control the temperature and limit AC usage; installing a variable speed motor for pool cleaning systems, which typically run for 8 to 12 hours a day; investing in energy efficient appliances; enrolling in PSEG’s Smart Savers program, which pays users a flat $85 to sign up in exchange for allowing the utility to adjust home temperatures a few degrees a few times during the summer to lower overall strain on the electrical grid.

Groceries

Some Long Islanders are shopping in grocery stores’ clearance sections, using coupons more and going out to dinner less to save on food costs, they said.

“Yeah, because your money doesn’t go as far as it used to,” Jennifer Hothersall, 50, said recently in the parking lot of the Walmart in Farmingdale.

Over the past few years, her family’s cost for a week and a half of groceries have risen from $250 to $400, said the Levittown resident, who is a married mother of three children.

West Babylon resident Barbara Taylor, 75, a retired phlebotomist who receives a pension and Social Security benefits, works part time stocking greeting cards at stores.

The mortgage payment for her home has risen because of higher taxes and insurance premiums, she said while in the Walmart parking lot.

“Everything has gone up except my income. … I’m doing OK. If I had young children that I had to take care of, I would not be OK,” she said.

Grocery inflation fell 0.3% in the 25-county region over the year that ended in March. But grocery prices were still 21% higher in the region and 25% higher nationwide in March compared to four years earlier.

The higher food prices can be attributed to several factors, including crude oil prices being about 25% higher in March than they were in March 2020, said Scott Hoyt, senior director of consumer economics at Moody’s Analytics, headquartered in Manhattan.

“That pushes up the cost of fertilizer and transportation,” he said.

Sales are down at five of the seven supermarkets David Mandell owns in Queens and on Long Island, including Holiday Farms stores in Franklin Square, Glen Head and Roslyn, he said.

The decline is partly a result of consumers responding to inflation, he said.

“People are very conscious of prices going up and trying to make their dollars stretch. And people are looking for more bargains, for sure,” said Mandell, who added that his customers are buying fewer items on average.

To help offset his stores’ rising rent, energy, labor and wholesale food costs, Mandell has cut the work hours of some of his 280 employees, he said.

Higher grocery prices are drawing more shoppers to discount stores.

Nationwide, foot traffic grew 26.1% at discount grocer Aldi’s stores and 15.6% at discount and dollar stores year-over-year in March, according to data that Manhattan-based retail analysis company Coresight Research provided from Placer.ai, a Los Altos, California, firm that analyzes location data from mobile devices.

Total grocery foot traffic grew 8.8% during the same period.

Steven Kent, an economics professor at Molloy University’s business school, said consumers seem most bothered by price changes in goods and services they purchase frequently.

“We call it the Snickers Bar impact … We know what the price of a Snickers Bar was five years ago and now when you walk into the store it’s much higher,” he said. “The price change is very visible — you recognize it — because of the frequency of purchase.”

Housing

The average asking rent on Long Island in mid-April was $2,855 across all apartment types, which was 1.9% higher than at the same time a year ago, according to CoStar, which publishes commercial real estate data.

Since the second quarter of 2020, the average asking rent has increased 17.5% across all apartment types. CoStar’s data includes professionally managed buildings and excludes developments made up entirely of affordable units or senior housing. Buildings with fewer than five units are also excluded.

Peter Elkowitz, CEO of the Long Island Housing Partnership, which administers local affordable housing lotteries, said the demand for affordable apartments far outweighs their availability.

Elkowitz said a recent lottery for the Shoregate development in Bay Shore drew more than 1,600 applications for 84 units.

“Of all the people we help, there’s probably 10 times that amount waiting,” he said.

Frank Rotolo, 30, recently won an affordable housing lottery run by LIHP and moved into a one-bedroom apartment in March at The Brio at the Boulevard in Yaphank, where he and his partner, Daniel, pay about $1,800 in the new development.

Some units were set aside for people earning up to 80% of area median income, while others were capped at 120% of area median income. That was equivalent to about $98,500 and $150,500, respectively for a two-person household.

Rotolo’s selection, 2½ years after he applied, helped him lower his rent after a 10% increase last year at his former apartment in Port Jefferson, where his landlord increased the rent for his two-bedroom apartment from $1,880 to $2,060.

“Neither of our salaries increased this year by 20%,” he said.

That hike stretched the couple’s budget, while Rotolo sought to balance other bills for his student loans, car payment and car insurance. The car insurance bill recently jumped 23% to $270 a month.

“When we were paying $2,100 a month [in rent] we were getting by by the skin of our teeth,” Rotolo said. “To me, and any other reasonable person, I can’t live like that … I wanted to pay my bills and student loans without having to be like, ‘Oh my god, am I going to make it?' ”

More than half of Long Island’s renters, about 51%, are cost-burdened, meaning they spend at least 30% of gross income toward rent, according to a report published by state Comptroller Thomas DiNapoli earlier this year. That was the highest percentage of any region in the state.

“If you’re paying more than that [30%], it has a major impact,” Elkowitz said. “You’re down to basic needs. You need to work so you need to pay those expenses — the car, the gas, the insurance — and also food. A lot of things are probably being cut back and what’s sad is it might be medical insurance or medical care.”

For homeowners, rising insurance costs, which are tied to the cost to rebuild, are also a major concern.

Local insurance brokers recently told Newsday recently they expect homeowners’ insurance premiums to increase between 10% and 30% this year, depending on the property.

Gasoline

Pump prices also have risen this month at Long Island filling stations.

According to AAA, a gallon of regular gasoline cost an average of $3.699 on Thursday in Nassau and Suffolk counties. This is up by more than 31 cents over the past four weeks and more than 7 cents over the past year.

Petroleum analysts emphasize the recent increase in New York gasoline is not due to inflation, however. Gasoline prices typically rise as the weather warms and refineries serving the state make their annual switch to summer fuel blends.

Summer gasoline is generally more expensive to make, said Tom Kloza, global head of energy analysis at the Oil Price Information Service. It has a different mixture of hydrocarbons that's optimized for warmer weather and more expensive to manufacture.

That said, government price forecasts do expect U.S. gasoline to rise slightly this year. According to the Energy Information Administration, U.S. gasoline prices should increase by nearly 3% on average from 2023 to 2024 thanks in part to an expectation that the world will consume more oil this year.

Forecasters do not expect the U.S. national average for gasoline to hit $4 per gallon at any time this year.

Pump prices on Long Island also are expected to rise this summer. But they should remain lower than in other parts of the country, especially in the West and the Pacific Northwest, where drivers are already paying more than $4 per gallon (and more than $5 per gallon in California) to fill up.