Stores reopen, reduce prices
Consumers enjoy discounts but could see hikes in gas, food
Shoppers entering the Galleria Mall in Fort Lauderdale last week were greeted with a lineup of pleasant surprises: From Macy’s on the mall’s west end to Dillard’s in the east, signs boasted breathtaking discounts of 20% to 60% on clothes, shoes, accessories and eyeglasses.
At the Boca Raton Town Center, shoppers encountered similar greetings.
“There’s definitely been a lot more business because of the discounts since the reopening,” said Maria, a counter manager who declined to give her last name at Louisa, a small jewelry store at the Boca Raton mall. “The luxury stores, too, have been having discounts. The first day we reopened the mall was actually super busy; people are looking for things to do.”
As consumers emerge from their homes and try to shake off the psychological effects of the coronavrius lockdown, businesses hope customers will return to the malls, stores and restaurants, open
their wallets and start buying again.
Massive unemployment has blitzed the state and national workforces, making households cautious about spending and driving up savings rates. Fear still grips many still in the workforce amid the belief that they, too, could lose their jobs, particularly if a second wave of the virus strikes. Federal stimulus and aid money has helped keep many households afloat thus far. And although the U.S. Department of Labor announced a slight dip in the monthly unemployment rate Friday, it still stood at a hefty 13.3%.
What will take to get them off the sidelines? And ultimately, will the region’s consumers face price inflation or deflation?
Under the latter, low consumer demand forces companies to cut prices and costs by reducing jobs and wages. Before the pandemic, many businesses had already made those moves to boost sales, so they can’t cut prices much more without bleeding profits.
Food prices have begun to rise; fuel prices are bound to follow; and house prices have remained high so far. But stores are trying to lure shoppers back with discounts, and health insurers are holding the line on patients’ outof-pocket costs. Fares for flights and trains, meanwhile, are still a bargain.
“I just don’t see a spike in inflation,” said Rebel Cole, a finance professor at Florida Atlantic University. He noted that the economy is operating at close to zero interest rates.
“This is a very strange recession,” said assistant professor of economics William Luther, also of FAU. “Many Americans will see their balance sheets improve at the end of the recession. We talk about all of the Americans who have lost their jobs. But keep in mind, many Americans have not lost their jobs. They’ve been home for the last 2½ months. Their spending has fallen significantly.”
“A lot of people have divested a big chunk of their portfolio and moved to low risk bonds, so you see low government bond rates,” Luther added. “Some are holding cash now in their checking and savings accounts.”
Mixed consumer sentiment
Consumer sentiment among Floridians is actually higher in some key areas than during the 2008 recession, said Christopher McCarty, director of the University of Florida’s Bureau of Economic and Business Research. Since 1980 the bureau has conducted monthly surveys of consumer attitudes toward the economy, including their own financial situations.
“Arguably, this was the worst recession, but the numbers aren’t coming down to that,” he said, “Consumers for whatever reason seem to have some expectations that this is going to be a short recession and their personal situation is going to be okay.”
Curiously, the survey also indicates many do not believe now is the time to make household purchases.
“You have this odd circumstance where people say now is a bad time to make a purchase, but they seem to think a year from now things are going to be okay,” he added.
As South Floridians do emerge from their lockdowns and decide to open their wallets, here’s a snapshot of what they’re facing in selected purchasing areas:
Rising food prices
Eating out is one area where consumers are going to pay higher prices, at least in the short-term.
South Florida restaurants — at half-capacity and barely surviving on sluggish takeout sales — are grappling with food costs on the rise. Now owners, who admit they can’t make money with government-mandated capacity limits imposed on their businesses, are trying to decide whether to pass the cost increases to their customers.
After national lockdowns drastically cut demand for food in the hospitality industry, dairy farmers dumped milk; meat packing plants closed as workers contracted or tested positive for COVID-19; and vegetable growers let their produce wilt in the fields.
Food shortages, in turn, affected wholesalers and supermarkets in South Florida, where prices have risen.
Industry analysts say price increases at restaurants should be temporary after traveling in league with recent increases in supermarket prices.
Record cheap gasoline
Cheap fuel prices have been in place throughout the lockdown and Floridians enter the 2020 hurricane season with the lowest gasoline prices on record for June 1 since 2003, according to AAA. The average price for gasoline is less than $1.90 per gallon, 70 cents per gallon less than this time last year.
“Pump prices remain stifled by lower-than-average fuel demand caused by COVID-19,” said Mark Jenkins, spokesman for AAA - The Auto Club Group. “Although gasoline demand has slowly recovered during recent weeks, it has not returned to a level that would cause pump prices to suddenly return to pre-pandemic levels.”
Motorists started the month with a state average of $1.88 per gallon, or 12 cents less than this year’s low, set on May 6.
But prices are bound to up along with demand, station operators say, as drivers take to the roads again as public health restrictions are lifted.
Health care waivers
A broad spectrum of health insurers are waiving various copays and other out-of-pocket costs to ensure patients have access to doctors during the pandemic.
“We bankrupted our hospital systems around the country” by stopping elective procedures that helped them make money, said Sean Snaith director of the Institute for Economic Forecasting at the University of Central Florida.
The occupancy was 92% before COVID hit. Elective procedures like mammograms and chemotherapy shut down for a couple of months.”
A sampling of the waivers: By mail this past week, Humana informed customers it is eliminating out-of-pocket costs for in-network primary care, outpatient and behavior health and telehealth visits.
The policy took effect May 1 and runs through Dec. 31.
“In the midst of the COVID-19 crisis, our members have told us that one of their most important needs is to stay connected to their self-care, their doctors, and other care providers,” the company said in the mailing, which contained a member ID card for use during check-ins at appointments.
Meanwhile, Florida Blue will waive all copays and deductibles for the medical testing for COVID-19 for members who are part of its commercial insurance plans, including the Affordable Care Act Individual and Medicare Advantage plans. The company is waiving early medication refill limits on 30-day prescriptions, is encouraging the use of virtual care, and is offering mental health support for experiencing stress from COVID-19.
Strong home prices
But home prices are rising more rapidly amid stiff buyer competition, industry leaders say. Tight supplies in single-family homes have would-be buyers bidding up prices.
“We’re not seeing any softness in prices, just the opposite,” said Snaith. “Inventories are extremely low and mortgage rates are at historically low levels. Buyers have been out there. Every mortgage person I talk to says the business on the purchase side is phenomenal.”
Mike Pappas, president and/ CEO of The Keyes Company, said his firm recently sold three $5 million homes to New Yorkers seeking a haven from the pandemic.
For single-family homes under $500,000, he said, buyers should act fast because of the intense interest in a limited supply by outof-towners from other states and countries.
“You’re definitely seeing multiple offers,” he said. “If it’s priced right, you’re seeing it fly off the shelves in rapid fashion. You need to get really educated online and know the market and move quickly. You need to get preapproved. You need to get to a lender.”
Sellers, meanwhile, prefer cash offers “because they don’t want the risk of the new financing.”
Discounts at stores
In Boca Raton, about 90% of the stores at the Town Center had of some kind of discount, most offering at least 20-30% off. Customers this week appeared to be in search of discretionary items like clothes and shoes more than anything else.
Stores such as Abercrombie, Hollister, Kay and other chains have sales ranging from 20% to 50%.
Some of the smaller stores that are less high end like Francesca’s have even higher sales. Francesca’s has 50% off the entire boutique.
American Eagle’s sales offer discounts of up to 60%.
Low transportation fares
Airlines are gradually retaking to the flight corridors with some incentive pricing on routes around the U.S.
This past week, Spirit Airlines, American Airlines, Delta Air Lines and Southwest Airlines announced large additions to schedules they had cut to the bone after the pandemic hit the economy in mid-March.
American and Spirit are offering cheap one-way fares between South Florida and the New York area ranging from $50 to just over $60 one way.
Rail fares, meanwhile, have plunged — all the way to zero.
Tri-Rail, South Florida’s commuter rail line serving 18 stops in Broward, Palm Beach and Miami-Dade counties, temporarily suspended its fares until the pandemic passes, so passengers are riding for free.
On Jan. 1, the mostly taxpayersubsidized line lifted its fares for the first time in more than 10 years by just under 10%. Governed by a zone system, prices range from $2.50 to $8.75 one way and between $5.00 and $17.50 for round trips.