By Sean Hemmersmeier, Las Vegas Review-Journal, March 17, 2023
Las Vegas resident Michael McCarthy used to visit casinos about five times a month, but now it’s down to once a month for one reason — inflation.
“The prices of everything have gone up and stayed high,” McCarthy, a retired stockbroker, said after purchasing groceries from Smith’s in Spring Valley.
The government reported this week that U.S. consumer prices in February rose 6 percent year-over-year, down from January’s 6.4 percent increase from 12 months earlier and the 40-year peak of 9.1 percent in June. Core prices, which excludes volatile food and energy costs, in February rose 5.5 percent from 12 months ago, down slightly from 5.6 percent in January. The Federal Reserve pays particular attention to the core measure as a gauge of underlying inflation pressures.
While inflation has been easing, it’s still high enough to cause many Las Vegas Valley residents and businesses to worry. It’s also still well above the Federal Reserve’s 2 percent annual inflation target, meaning the central bank could raise interest rates again which could lead to higher rates on mortgages, auto loans, credit cards and business loans.
But the recent collapse of Silicon Valley Bank and Signature Bank has put the Federal Reserve in a “tight squeeze” when it comes to implementing further rate increases to tamp down inflation, said Stephen Miller, research director at UNLV’s Center for Business and Economic Research.
“(The bank failures) over the weekend have really called into question, what was the Fed’s next move?” Miller said. “We’ll find out next week.”
The Federal Reserve will meet Tuesday and Wednesday to consider next steps, and Miller thinks their decision will largely focus on the effects of the souring banking system on the economy.
“The next meeting is crucial,” Miller said. “What they do then is a signal about what may happen down the line in the next couple of months.”
Sales higher but profits flat
Able Baker Brewery owner Randy Rohde said the downtown Las Vegas brewery saw overall sales rise 25 percent in 2022, but its profit margin stayed about the same.
“We’ve managed to make it work, but we are just getting by,” Rohde said.
The biggest cost increase has been from vendors, who supply them with grains, hops and carbon dioxide.
Dave Forrest, co-owner of CraftHaus Brewery, described 2022 as a “flat year.” The Henderson-based brewery’s sales increased but higher supply costs cut into its profits.
Forrest said prices of raw materials like hops and malt increased 10 percent to 20 percent while fuel and freight costs climbed 30 percent to 40 percent during the past year.
“Last year, it just felt like we were in a boxing ring and just getting pummeled from all over in every direction,” Forrest said. “We saw increases pretty much from every vendor or supplier that we use.”
In order to adapt, CraftHaus made some changes such as printing its own beer labels instead of hiring a third-party and Forrest will often handle certain pickups for supplies instead of paying a delivery company.
Both breweries said they’ve also had to slightly increase their prices to help cover the higher supply costs.
CraftHaus said its beer prices are up 3 percent to 6 percent.
Forrest said raising its prices wasn’t an ideal option, but inflationary pressures made it necessary and annual increases will likely be the “new norm.”
“(Our) increase in prices aren’t making up for the 20 to 30 percent increase in costs,” Forrest said. “You can’t just increase prices by 30 percent since people aren’t going to buy your beer.”
Food prices up
Jeremy Miles, a butler at Caesars Palace, said he now pays $25 for a bag of cat food, compared to $13 before the pandemic.
“All around, inflation has gotten to everything,” Miles said outside of an Albertsons in Spring Valley. “It wouldn’t be as big of a problem if my wages had also kept up, but I haven’t gotten a raise in years.”
Bryan Wachter, senior vice president of the Retail Association of Nevada, said higher food prices are concerning and pointed to February’s Consumer Price Index.
Food prices rose 0.3 percent in February, the smallest monthly gain in nearly two years, though they’re still up more than 10 percent from a year ago, according to the Labor Department. The price of eggs, which have soared 55 percent from a year earlier, actually dropped 6.7 percent just in February. And beer prices purchased to drink at home increased by 7 percent year over year while beer away from home rose 5.3 percent year over year.
“These food prices are a huge one that is causing significant worry among (RAN members),” he said. “That limits other areas where people can spend.”