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Lower Jet Fuel Prices, Lower Air Fare - 8/28/15

As indicated by writer Josh Mitchell, jet fuel prices have declined by nearly thirty five percent over past year, roughly tracking the decline in oil prices according to the U.S. Labor Department’s producer price index.  The decline has helped airlines produce their best ever profits.  With cost savings in hand, airlines have begun to cut airfares, though not by as much as fuel prices have fallen. 

Airfares declined by nearly six percent in July from a month earlier, the largest decline since late nineteen ninety-five.  Every little bit of savings helps, particularly in light of rising rents.  The shelter cost component of the consumer price index was up three point one percent in July from a year earlier, the largest advance since early two thousand and eight. 

Even with the increase in housing costs, overall consumer prices are up just zero point two percent from a year ago, an extraordinarily weak reading that primarily reflects falling fuel costs.  Core inflation, which excludes volatile food and energy prices, is up by a more typical one point eight percent.  All of these data will be in front of the Federal Reserve next month when it meets to determine whether to raise interest rates.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.