Carnival Corp. issues year-end earnings every December and looks ahead to the coming year. In some ways last year's report looks just like this year's. For example, in 2017 bookings were ahead of the prior year in both occupancy and price, which was also true of the just published report.
But what jumps out at me was that last year, Carnival was wrong both on how strong its pricing would be and how much costs would rise in 2017.
In December 2016, Carnival projected that its net yields from revenue would rise 2.5% in 2017 and cruise costs (excluding fuel) would rise 1%.
The actual results were a net yield increase of 4.5% and a rise in costs, measured to remove the effect of currency changes, of 2.7%.
That would appear to suggest a robust business, and perhaps the prospect for continued price and cost increases in 2018, as the extraordinarily low inflation of the past few years begins to heat up.
The Federal Reserve, which controls the money supply and thus interest rates, raised its target rate this month for short-term rates by one-quarter percent. Although it said inflation in the short term is below its 2% target, it sees the prospect of 2% inflation emerging over the "medium-term."
In its December statement, it said "economic activity has been rising at a solid rate and the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters."
The Fed will get a new chairman in February, and the economy will get at least a short-term boost from the comprehensive tax cut approved by legislators in the waning days of 2017.
All of which suggests that the current economic weather pattern of low interest rates, subdued inflation, modest price increases and little or no growth in wages may be on the brink of a change.
For cruise suppliers, that could mean higher nominal prices, but a decline in real revenue and income after inflation takes effect. Cruise retailers, while not immune from inflation, would benefit from higher nominal prices on which their commissions are based.
With higher inflation comes the risk of recession as policy-makers try to cool increasing prices by quickly escalating interest rates. That seems to be nowhere on the horizon. And yet, the expansion that began in mid-2009 already is the third-longest in U.S. history and if it continues into the second half of 2019 would exceed the 10-year record set by the 1990s economic boom.
It doesn't feel to me like we're in the midst of record setting prosperity. Nevertheless, let's hope as we head into 2018 that cruise prices and the economy stay in a Goldilocks zone - not too hot, not too cold - for the foreseeable future.