FAU Economists: Elevated Inflation Could Increase Summer Travel Costs

Elevated inflation doesn't bode well for travelers planning summer vacations this year, according to two economists at Florida Atlantic University.

Elevated inflation doesn't bode well for travelers planning summer vacations this year, according to two economists at Florida Atlantic University.

Despite a decline from the prior month, the April update confirmed that inflation remains well above the Federal Reserve's 2% target. The Personal Consumption Expenditures Price Index (PCEPI), the Fed's preferred measure of inflation, grew at an annualized rate of 4.9% in April.

"For households planning summer vacations, this is not good news," said Eric Van Tassel, Ph.D., associate professor of economics in FAU's College of Business. "Some of the fastest-growing price categories included food services and accommodations, housing and utilities, as well as recreation services."

The PCEPI grew at an annualized rate of 4.8% over the last six months and 3.8% over the last year.

Meanwhile, while core inflation declined slightly, it remained elevated as well. Core PCEPI grew at an annualized rate of 2.9% in April, down from 3.6% in March. It grew at an annualized rate of 3.8% over the last six months and 3.3% over the last year.

"These types of temporary supply shocks generally do not have a persistent effect on prices, giving analysts reason to believe the inflationary effects may prove largely transitory," Van Tassel said.

Nominal spending remains a key driver of elevated inflation, noted William J. Luther, Ph.D., associate professor of economics in FAU's College of Business. Nominal spending grew 5.9% from the first quarter of 2025 to the first quarter of 2026. With more money chasing roughly the same amount of goods and services, stronger nominal spending growth has contributed to higher inflation.

While many observers point to tariffs and geopolitical conflicts as the primary drivers of rising prices, Luther said the data suggest demand-side pressures continue to play a significant role.

"It is tempting to attribute the increase in inflation to the salient supply shocks we have experienced over the last year or so, including the tariffs levied last year and the conflict in the Middle East beginning earlier this year," Luther said. "But here's the thing: constrained supplies do not push nominal spending growth higher. Rather, faster nominal spending growth is the telltale sign of a demand-side problem."

Although inflation has moderated from its peak, both economists noted that price pressures remain above the Federal Reserve's target and continue to affect consumers' purchasing power. As households make spending decisions for summer travel and other discretionary activities, elevated costs for lodging, dining and recreation are likely to remain a challenge.

-FAU-