Economy
1:44 am
Mon November 25, 2013

Many Americans Will Be Giving Thanks For Lower Prices

Originally published on Mon November 25, 2013 12:11 pm

When Americans drive to their Thanksgiving gatherings this week, they will have one more blessing to count: lower costs.

Gasoline is cheaper than last year. Turkey prices are down, too. And retailers are joining in, offering big discounts on TVs and other goods.

For people who watch every penny, this Thanksgiving will be a good time for pinching.

"Travelers attempting to carve out a travel budget will be happy to know that Thanksgiving will be the least expensive holiday of the year," AAA chief operating officer Marshall Doney said in a statement.

Economist Michael Montgomery, writing for the forecasting firm IHS Global Insight, saw no reason for price-hike worries. "There is no inflation pressure now and none in the pipeline. That is why consumer goods prices are easing rather consistently," he said.

The gasoline-price drop is especially noticeable. A gallon of regular gas is running at about $3.21, according to the federal Energy Information Administration. At this time last year, the price was 21 cents higher. Economists say the current price will leave an extra $2.5 billion in consumers' pockets, compared with 2012.

Drivers are noticing the cheaper prices. "I think they seem lower than they have been in a while," Jeff Kauffman said as he filled his gas tank at a station in Stamford, Conn. A gallon was selling for $3.63 there, well above the national average, but down from the $4 he had been paying earlier in the year.

Fuel prices are at the lowest levels for the Thanksgiving holiday since 2010.

Kauffman said he worries that cheaper gas will encourage more drivers to hit the road during peak travel periods around Thanksgiving. At this time of year, the highway congestion is "awful. It's always awful," he said.

But AAA says lower fuel prices may not spur as much road traffic as some might expect. In fact, during the period from Nov. 27 to Dec. 1, AAA predicts 38.9 million people will drive more than 50 miles from home, down 1.6 percent from last year.

"While the economy continues to improve, the sluggish pace of the recovery is creating uncertainty in the minds of some consumers," Doney said in a statement.

That uncertainty also is restraining air travel as well. Airlines For America, a trade group for the major carriers, says it expects a slight increase in passengers this year. But AAA disagrees, predicting a dip in air travel.

In any case, most travelers won't see significantly higher ticket prices, according to Brian Ek, senior travel analyst with Priceline.com.

"I would say the fares are on par with last year, or up less than 5 percent, so nothing meaningful," Ek said. Given the lack of consumer confidence, "the airlines know there's only so much elasticity in pricing, even for the holidays."

Tom Lekowski is a Charlotte, N.C., resident who plans to fly to Boston for a Thanksgiving visit. He says he did not notice any serious price increases when he booked this flight. "It's about the same as last year," he says.

When Lekowski's family members gather around the dinner table, they likely will find their wallets have not been squeezed — at least no harder than last year. The American Farm Bureau Federation says an average Thanksgiving meal for 10 people will cost $49.04 this year, down 44 cents from last year.

And if the urge to shop strikes them, consumers should find plenty of bargains. For example, Wal-Mart said it would match some of Target and Best Buy's most enticing "Black Friday" bargains — well before Thanksgiving Day even arrived. That kind of early and fierce price competition shows retail chains "are getting ready for a very intense Black Friday-to-Christmas Eve shopping season," according to an IHS Global Insight report.

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Transcript

DAVID GREENE, HOST:

Forty percent of Americans are expected to travel this Thanksgiving holiday. We're seeing lower gas prices right now, and so people hitting the road will get a break. Now, if you're flying though, in theory, you might expect airlines to pass on their savings in the form of lower airfares. But think again.

Here's Kaomi Goetz, from member station WSHU.

UNIDENTIFIED WOMAN: Bye-bye.

KAOMI GOETZ, BYLINE: Just like every year, Tom Lekowski, of Charlotte, N.C., will fly to Boston to see his family for Thanksgiving. His ticket price seemed routine, too.

TOM LEKOWSKI: Three seventy-five. As I recall, it's about the same as it was last year.

GOETZ: He's one of 25 million passengers expected to fly during the holiday period. Airlines believe they'll see a slight increase over last year. Some analysts are predicting a dip. In any case, Lekowski says cost wasn't a factor.

LEKOWSKI: Well, if it's a thousand dollars, maybe that might have made some effect, but likely not. Got to go see family once or twice a year.

GOETZ: The nation's airlines are counting on the tug of those family heartstrings. High travel demand around the holidays traditionally provides the companies with a much-needed, year-end revenue boost. And this year is no different.

JOHN HEIMLICH: The airlines continue to emerge from a large financial hole on their way to modest profitability.

GOETZ: John Heimlich is the chief economist for the trade group Airlines for America. He says the nation's 10 largest carriers will see their collective profits rise by $4.5 billion this year. That's a welcome improvement over 2012, when profits were flat. Airlines have struggled in recent years because of relatively low travel demand and high jet fuel prices.

Heimlich says more than a third of airline costs are tied to fuel prices. Even though they have fallen some, airlines are still recovering from the price spikes that hit between 2010 and last winter.

HEIMLICH: In the first nine months of 2013, they generated a modest 4.0 percent profit margin.

GOETZ: The need for bigger profits is why airlines have resorted to charging passengers for former freebies, such as checked baggage, better seats - even for snacks. Besides piling on fees, the airlines are trying to pack more people into fewer planes. On the busiest travel days, planes will be more than 85 percent full. And the carriers are nudging up fares. Travel agents say this year's Thanksgiving fares are up by about 3 to 7 percent from last year.

Courtney Scott is a senior editor at online travel agency Travelocity. She says airlines have more pricing power this year.

COURTNEY SCOTT: That's largely attributed to airlines not adding very many seats into the air and the high demand and many people clamoring for seats at the holidays.

GOETZ: Airlines insist the average ticket price of $415 is actually a price decrease when adjusted for inflation.

While airlines and passengers may be quibbling over the real cost of air travel, drivers can be sure they'll be getting a bargain, at least compared with last Thanksgiving. In recent months, gasoline prices have been tumbling, down to the lowest levels in nearly three years. A gallon of gas is even below $3 in some states.

The lack of hurricanes in the Gulf of Mexico helped create healthy supplies of gasoline this fall. That could translate into a nice price surprise at the pump.

(SOUNDBITE OF A GAS NOZZLE)

GOETZ: Jeff Kauffman fills up his tank at a gas station in Stamford, Connecticut. Regular unleaded is now $3.63 a gallon.

JEFF KAUFFMAN: I think they seem lower than they have been in a while.

GOETZ: Last summer, he paid $4 a gallon. With the economy still struggling, AAA, the auto club, expects slightly fewer cars on the road this year. But Kauffman believes the recent gas price drop might encourage people to make last-minute trips, adding to congestion.

KAUFFMAN: It sucks. It's awful.

(LAUGHTER)

KAUFFMAN: It's always awful.

GOETZ: But Kauffman has a plan. He and his family will leave in the middle of the night, arriving just in time for turkey in Maryland.

For NPR News, I'm Kaomi Goetz.

(SOUNDBITE OF MUSIC)

GREENE: This is NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

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