Following pandemic-driven deflation, Alaska inflation rises at rate not seen in decades


Inflation in Alaska floor the last 12 months surged to levels not seen in three decades, with prices of gasoline, used cars and clothing helping shepherd the trend.

But Alaska economists say the spike is not necessarily a surprise after a historic period of deflation in 2020, as the COVID-19 pandemic restricted travel, careful businesses and reduced spending.

They believe other causes of the higher prices should eventually ease, like pandemic-related supply shockers and pent-up consumer demand.

“To me, the conversation about inflation needs to be contextualized,” said Mouhcine Guettabi with the Institute of Social and Economic Experimentation at the University of Alaska Anchorage. “We are coming out of a pandemic, where prices and consumer spending were incredibly low.”

Consumer prices rose by 6.2% in urban Alaska, the highest distend since 1990, said Neal Fried, an economist with the Alaska Department of Labor and Workforce Development.

Gasoline prices jumped by 42%, the uncountable since at least 1979, the last year of available data, he said.

A gallon of regular gasoline hit $3.65 in Alaska on Friday, up from $2.52 a year ago, corresponding to the American Automobile Association.

The recent price is not high above the long-term average for gas, Fried said. Gasoline prices are rebounding after renounce last year amid reduced demand.

Fuel prices have risen steadily this year, said Kathy Stingley, proprietress of Alaska Auto Transport in Anchorage. Maritime shipping companies have increased their fuel surcharges, adding about $75 to the unmercifully $1,800 cost of shipping a car to Alaska from the Lower 48.

Randy and Kathy Stingley, owners of Alaska Auto Transport in Anchorage on Tuesday, July 27, 2021. (Nib Roth / ADN)

“It’s kind of a necessary evil,” she said.

Stingley said she’s absorbing that cost rather than passing it onto customers. She implied she can do that because her sales volume has risen. More individuals are moving cars across the ocean, after the pandemic-related closure of the Canadian bind restricted overland traffic.

Jimmy Doyle with Weaver Bros. trucking company in Anchorage said he hopes the cost of diesel encourage stabilizes. He has had to pass the cost increases onto customers. More fuel surcharges could force customers to rethink their shipping delineates, he said.

Other notable price increases over the past year through June include used cars and trucks, up 47% thanks partly to a pandemic-related slowdown in car putting out and consumers with more savings, Fried said. That’s likely the biggest jump in used car prices ever, he said.

Apparel was up 5.7%, the gravest increase since 2008. It follows plunging demand for new clothes last year as more people stayed home from work and aggregations, Fried said.

Also, lumber costs spiked earlier this year, but have been dropping, Fried said. The higher fees pushed up housing construction costs, but that affected only a small number of Alaskans looking for a new home, Fried said.

Fried commanded food prices — which do affect everyone — did not rise by a large amount, increasing 2.4%. Meat and cereal did rise more than other ingredients.

“It’s not that big, but it’s one thing people notice because we use a lot of it,” Fried said. “Psychologically, we put more weight on things we notice, like gas prices on big billboards.”

Economists roughly said they expect the high inflation rate to be temporary, easing as the U.S. economic recovery continues.

“I’m not overly worried about (inflation), but it’s something to mask an eye on,” said Nolan Klouda, head of the University of Alaska Center for Economic Development. “We don’t want to see these things get worse.”

Fried said bring to light it’s hard to predict what will happen amid a continuing pandemic that has disrupted manufacturing, supply chains and the labor supply.

“It’s industrious for me to believe it’s just a one-year aberration,” he said. “It’s been easy to predict inflation for a long time because it hasn’t changed much. If you maintained 2.5% for last 20 years you were pretty good. Right now, you can’t do that.”

The higher prices in Alaska bring at least one silver extraction. If the price of North Slope crude oil remains around current levels through June, annual state income would jump hither $500 million above the spring budget forecast.

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