Summer Travel Costs Set to Rise as Inflation Remains Elevated — The Florida Atlantic University Board of Trustees (Florida Atlantic University College of Business)

Event summary

April PCEPI grew at an annualized rate of 4.9%, well above the Federal Reserve’s 2% target.
Food services, accommodations, housing, utilities, and recreation services saw the fastest price increases.
Core PCEPI grew at an annualized rate of 2.9% in April, down from 3.6% in March but still elevated.
Nominal spending grew 5.9% from Q1 2025 to Q1 2026, contributing to higher inflation.
Demand-side pressures, not just supply shocks, are a significant driver of inflation.

The big picture

Elevated inflation, driven by both supply shocks and demand-side pressures, is set to increase summer travel costs. The Federal Reserve’s preferred inflation measure, PCEPI, remains significantly above the 2% target, impacting consumer purchasing power. This trend highlights the broader economic challenges facing discretionary spending sectors, particularly travel and hospitality, as households navigate higher prices for essential and non-essential goods and services.

What we're watching

Inflation Trends: How sustained inflation will affect consumer spending on discretionary items like travel.
Federal Reserve Policy: Whether the Fed will adjust monetary policy in response to persistent inflation.
Consumer Behavior: The pace at which travelers adjust their plans due to rising costs.