One East Hampton resident who travels to others’ homes to work no longer takes assignments beyond a certain distance, due to time in traffic and the price of gas. A craftsman who repairs and refurbishes a lot of furniture in the Hamptons says costs for some materials soared.
“I used to pay $80 for a roll of cane. I just caned a bunch of chairs,” said Frank Tedeschi Sr., who owns The Refinishing Company Inc., in Island Park, which does work on the East End. “It cost me $380 for the same roll of cane with shipping and handling.”
The sun isn’t the only thing that rises in the east, and over Long Island; inflation is rising in the Hamptons, as well as across the region and nationwide. John Rizzo, an economist and professor at Stony Brook University, said inflation is hitting Long Island, including the East End.
“Up until recently, the evidence suggested we were evading it,” he said. “More recently, we got some worse news.”
Prices in the New York area rose 0.4% in February compared to 0.6% nationwide, with that rise largely due to increases in a few categories.
“Increases in prices for shelter were the major driver of change for the U.S., while shelter, along with increases in prices for new and used motor vehicles, drove the increase locally,” said Lisa Boily, an economist with the United States Bureau of Labor Statistics.
If housing is expensive on Long Island, that can be an even bigger issue further east where the cost, even before inflation, is often high.
“As for the East End, I think the major issue there is affordable housing,” said Shital Patel, principal economist and labor market analyst for Long Island for the New York State Department of Labor. “The high cost of housing is making it hard for lower-income workers, particularly service workers, to live there.”
The February consumer price index for all items compared to the prior year, however, was up 6%, flat with the national average. Food and beverages rose 7.7% on Long Island, below the 9.2% national average. Fuels and utilities on Long Island, however, were up 16.1 % year over year, compared to 11.1% nationwide, driven by a 20.9% rise in electricity compared to 12.9% nationwide.
Some companies like East End Volleyball based in Hampton Bays say they work hard to keep prices low and boost demand in the region they love.
“My husband came out to Hampton Bays to go to Southampton College and never left after graduation,” said Kathleen Caulson Heiles, marketing director for East End Volleyball. “He loves it out here.”
To slow inflation, the Federal Reserve has been hiking interest rates, although prices stubbornly remain high rather than dropping.
“Look at the price of eggs. Look at restaurant prices,” Rizzo said. “We have a continuing problem with inflation. And the cost of borrowing is going up.”
While rising borrowing costs could increase companies’ expenses, Rizzo said the net effect is to decrease spending, slowing demand and inflation. Still, he said, continued rate hikes could cause other problems.
“Raising interest rates scares the financial markets. And that rattles 401(k)s,” Rizzo said. “Raising interest rates is a blunt instrument of high inflation, but it’s the only instrument that the (Federal Reserve) has. We got to ride out the storm and hope with a few more hikes, we get a handle on inflation.”
Local government can’t have much impact on inflation, Rizzo said, because it can’t move the levers that impact prices. But local government can impact costs of living in the form of taxes.
“The big driver of inflation is, ‘What does it cost for a mortgage? What does it cost to buy a car? How much does it cost to buy eggs?’” Rizzo said. “Local government can’t do much about that.”
The East End could be more susceptible than many regions, because of its reliance on tourism.
“On the East End, a big part of the economy is leisure and hospitality,” Rizzo said. “That’s very price-
sensitive. It’s not good news for leisure and hospitality.”
He said discretionary spending is more impacted by inflation, making leisure and hospitality particularly vulnerable.
“It’s more prone to the adverse effects of inflation,” Rizzo said. “You don’t have to go to a fancy restaurant on the East End or a fancy hotel. If inflation takes a bite, those are the first things you’ll stop doing.”
More residents shifting from seasonal to year-round East End residences could increase demand for products and services. And the fact that many businesses close during colder months can shrink supply, also fueling inflation. While some businesses closed, new businesses opened, injecting more choices and competition. Il Buco al Mare opened in Amagansett, Weill Cornell Medicine opened in Southampton and Kissaki opened in Water Mill. Nevertheless, the wealthiest aren’t affected by inflation.
“The ultra rich aren’t impacted, but they’re a small percentage of consumers,” Rizzo said.
If inflation becomes negligible, that could boost the economy. But it’s hard to tell whether or when that will happen.
“What could be done to make things better? Getting a handle on inflation,” Rizzo said. “And we have to stop raising interest rates and get a pattern of sustainable growth.”
The United States Federal Reserve Bank is targeting 2% inflation, but Rizzo said 3.5% would be fine.
“The danger is (that) inflation can get out of hand. Then you can get hyper-inflation, which nobody wants,” Rizzo said. “That’s where inflation keeps increasing and increasing. You have too much money, too few goods. And you’re not doing anything to combat it. That’s why the Fed is so concerned about controlling inflation.”