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Jessica Harmison-Olson of Maxon Fine Jewelry says jewelry sales remain brisk despite inflation, and estate purchases also are up.
Heather Mosley: | SBJ
Jessica Harmison-Olson of Maxon Fine Jewelry says jewelry sales remain brisk despite inflation, and estate purchases also are up.

Buyers Defy Expectations: Though inflation has reached 40-year high, many local retailers report brisk business

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Last edited 9:55 a.m., July 26, 2022

 In some respects, inflation is like former Supreme Court Justice Potter Stewart’s famous line about pornography: “I know it when I see it.” 

Consumers may not understand every factor at play, but they know $4.66 feels like a lot to pay for a gallon of milk.

In fact, the Bureau of Labor Statistics reported in May the all-items inflation index surged 8.6% over the past year, the highest increase since 1981. The energy index rose 34.6% year over year, and the unadjusted 12-month food index increased 10.1% for the 12-month period, the first double-digit increase for food since 1981. Gasoline increases are among the most noticeable. Year over year, all types of gas had risen 48.7% in May, according to the BLS. A gallon of gas in the state averaged $4.57 as of press time, according to AAA.

Consumers are feeling the effects of rising prices, but when asked if their behaviors have changed as a result, local retailers and service providers report not a lot has changed yet in the Queen City.

Retail observations
Since 1972, Maxon Fine Jewelry, located on East Battlefield Road, has been selling heirloom-quality jewelry. When it was founded, it was known as Maxon’s Diamond Merchants and Estate Jewelers, and even with its newer branding, Maxon still buys estate jewelry from customers.

Jessica Harmison-Olson, managing partner of Maxon, said business is strong and growing, declining to share revenue.

“Inflation hasn’t caught up with our clients,” she said. “We’ve been doing great.”

Customers often choose an upscale jeweler for special occasions.

“Engagements don’t go away,” she said. “It’s a forever ring.”

Harmison-Olson said while sales are strong, buying, too, is brisk, as more and more customers bring estate jewelry in to sell, perhaps as a hedge against inflation.

At May Motor Co., which deals in preowned cars from its lot on South Campbell Avenue, salesperson Darrell Denby is having a very good year, though 2021 was the best year he as an individual has had in 26 years in the business. He declined to provide sales figures.

“Things are crazier now than I’ve ever seen them,” Denby said. “Prices are just absolutely ridiculous. We’re literally paying today what we sold stuff for 90 days ago, and it doesn’t show any signs of letting up.”

New car prices are at a near all-time high, according to vehicle valuation company Kelley Blue Book. The average new car in May sold for $47,148 – the second-highest total on record. Those prices may be pushing consumers toward a used car. KBB finds that average price is $28,312, a number that’s showing signs of leveling off after a roughly 4% jump in April.

Denby said it’s hard to get used car inventory.

“When you do get it, you just have to pay through the nose for it,” he said. “We don’t have any trouble selling them.”

One thing Denby has noticed is that there aren’t as many casual shoppers as usual.

“It’s like maybe the people that are out are for real. They’re not just out kicking tires,” he said.

Battlefield Mall also reported no downturn in customers, while declining to disclose figures.

“Traffic at Battlefield Mall has been on a steady and continuous increase, and we expect this trend to continue,” said spokesperson Amanda Estes.

Out and about
From her office at Rockwood Motor Court on West College Street, owner Phyllis Ferguson rents out original Route 66 tourist cabins to visitors from all over the world.

When asked if tourist travel on the historic route is up or down, she said it’s hard to say. “Once you get into March, things are pretty busy,” she said.

Ferguson has stayed almost fully booked, and she reports that she had an excellent June, with near total occupancy.

“It was great – very solid, with some very exciting increases this year,” she said. “Coming into July, we’re looking really good.”

That’s not what one might expect to hear from someone whose customer base depends on automobile travelers.

“This month I’ve seen more people coming in with their coolers and having little lunches,” she said. “They’re probably not going out to eat.”

She added not all of her guests are Mother Road explorers.

“Some folks are just going from point A to point B,” she said. “I had a couple on the patio Saturday night having some crackers and cheese and fruit. People are just cutting back a little bit because gas prices are affecting their plans.”

A May survey by the American Hotel & Lodging Association suggests inflation is impacting summer travel but not stopping it. It reports 69% of Americans are likely to travel and stay overnight at their destination and 57% plan to take a family vacation in the summer months.

However, the association reports gas prices and inflation are big concerns for travelers, with 90% of their survey respondents saying these are “a consideration.”

Due to current gas prices, the association notes, 57% are likely to take fewer trips, 54% are likely to take shorter trips, 44% are likely to postpone trips and 33% are likely to cancel trips with no plans to reschedule them.

A roof overhead
Jeff Kester, CEO of the Greater Springfield Board of Realtors, said he hasn’t seen much impact on home sales from inflation.

“We’ve undergone now several years of sustained large increases in housing prices,” he said. “Our inflation is more or less baked in to the current equation.”

The GSBOR reports 710 units sold in May 2022, with a total volume of $195 million and an average sales price of $282,000. Homes were on the market an average of 12 days.

By comparison, the board reports that in May 2021, the total sales volume was nearly $169 million with an average sales price of $242,000. Homes were on the market an average of 15 days and 722 units were sold.

Interest rate increases may have an impact on what some buyers might qualify for, Kester said, but the sector is strong.

The average rate on a 30-year fixed mortgage as of press time is 5.98%, according to Bankrate.com. That’s the highest since the Great Recession.

Inflation dovetails conveniently with a generational move back to the core of the city, where home prices are lower, Kester said.

“Millennial buyers and Gen Zs are very anxious to get back into the idea of neighborhood communities and walkability,” he said. “An era of sustained inflation would work hand in hand with that kind of move.”

Megan Short, executive director of the Springfield Contractors Association, said the construction marketplace, too, has become inured to inflation.

“When it comes to the construction side, we’ve been seeing materials shortages and increases so frequently since COVID began that I think it hasn’t changed quite as much in that regard,” she said. “It’s the same thing we’ve seen for a year or two, and there’s an understanding that numbers are going to keep increasing.”

In the past year, building materials costs have climbed nearly 20%, according to the National Association of Home Builders.

She said price increases have had an impact, but people in the industry have learned to work together.

“We’ve had to put systems in place because of the shortages,” she said.

That’s not to say inflation hasn’t impacted the industry.

“Inflation as a whole, that impacts your workers and everyone,” Short said.

An economist’s view
When asked to explain current inflationary trends, David Mitchell cited Milton Friedman.

Mitchell is professor of economics and director of the Bureau of Economic Research and the Center for Economic Education at Missouri State University. Friedman was a U.S. Nobel laureate in economic sciences.

Friedman’s most famous quote says, “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

The Notorious B.I.G. gets to the heart of the matter more quickly than Friedman in the title of one of his most famous songs: “Mo Money Mo Problems.” 

The Federal Reserve injecting money into the economy without working to reduce its balance sheet is a root cause of inflation, according to Mitchell, citing in part the economic stimulus brought on by the COVID-19 pandemic.

He said the Fed wants inflation to rise around 2% each year, and before the pandemic, it was running around 1% to 1.5% in some years.

He noted in the last five years, the Fed changed its language from a target of 2% to having a target of 2% on average, meaning it would be acceptable to hit 1% in one year and 3% the next.

“You can’t turn off inflation like you can interest rates,” he said, noting adjusting the federal prime rate is what the Fed uses to control inflation. In mid-June, the Fed raised its benchmark interest rate by three-quarters of a percentage point. That’s the most aggressive hike since 1994.

Mitchell said that when workers notice inflation, they want their wages to go up, too.

Mitchell said the current inflationary pressures can be attributed to three sources: supply chain disruption, coronavirus stimulus payments and the federal interest rate policy.

He didn’t object to stimulus payments.

“I thought it was a good idea at the time,” he said. “I still do. When you tell people you cannot work, don’t leave your home, you have to figure out a good way to do that. The problem was that the Fed should have realized when you are literally giving away trillions of dollars, you’re adding more fuel to the fire.”

He admits that he, like others, is rethinking dinners out, which means restaurants will lose customers. It was already hard for restaurants to be in business, he said.

He also has stopped driving as much.

“When it becomes obvious this is a recurring problem, people change their behaviors,” he said.

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