US price increases hit consumers

By Agence France-Presse
Thursday, February 17, 2011 16:11 EDT
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WASHINGTON – US energy and grocery prices are on the rise, hitting already struggling consumers and posing a tricky dilemma for US policy makers.

Confirming what most US shoppers already suspected, the Labor Department on Thursday reported prices for everything from vegetables to unleaded fuel rose again in January.

The Labor Department’s consumer price index rose 0.4 percent for the month, a rate that was slightly higher than economists expected and which confirmed large price increases for commonly bought goods in the last year.

The figures showed gasoline prices have leaped over 13 percent in the last 12 months, while grocery prices rose slowly but surely by just over two percent.

That trend has experts increasingly worried.

While poor weather, political instability and rising demand from booming countries like China frequently push up the cost of producing everyday goods, until now the US consumer has largely been spared.

“Rising oil prices have been driving gasoline higher for some time, and now we are also seeing rising food costs filter through to the consumer,” according to Nigel Gault, an economist with IHS Global Insight.

Energy commodities and food increases accounted for over two thirds of January’s price increase. During the month food prices increased at the fastest rate since 2008.

That is tough to swallow for Americans who have seen their real earnings fall for the last three months, but it also poses a problem for policy makers, who have dismissed high prices for common consumer goods as an aberration.

Federal Reserve chairman Ben Bernanke has focused instead on low “core inflation”, which strips out volatile food and energy prices, as a sign that demand remains weak, thanks in no small part to high unemployment.

Dismissing inflation hawks, the Fed is pumping $600 billion into the economy and has kept ultra-low interest rates on hold, in an effort to stimulate the economy.

But with rising prices increasingly felt on Main Street, the Fed’s detractors are becoming more vocal. Critics say that both low rates and stimulus spending are stoking inflation just as the economy recovers.

“The January… figures point to what I believe is the beginning of a substantial uptrend in core inflation,” said Stephen Stanley of Pierpont Securities.

While most economists believe unemployment is still too high and wages too low to result in dangerous levels of inflation, rising consumer prices could hurt the economy in other ways.

“An inflationary spiral can only take root if wage inflation accelerates, which we don’t expect,” said Gault. “Instead, rising price rises are squeezing consumer pocketbooks and will restrain the growth in consumer spending volumes.”

That could leave the Fed facing a tough choice between maintaining or cutting stimulus, both of which could hurt consumer demand and with it a key pillar of the economy.

Agence France-Presse
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  • http://thepoliticalbandit.com/ William Cormier

    World food prices are at an all time high. Has anyone bought a loaf of bread lately and noted they are paying approx. 40% higher prices than they were just one year ago???

    The government has stated there “is no inflation” and thereby denied Social Security recipients their cost of living increase for the past two years. Food is rising an an unprecedented pace and much of the higher costs are being cleverly hidden by packages that are smaller than they used to be; if you don’t inspect almost everything you purchase you may not notice this trend. Orange Juice for example used to come in 64 Oz containers – now, several of them are just 60 Ounces. Food Stamps have not risen a penny, therefore, SS and Food Stamp recipients are getting the same amount of money but have to survive on much less – and the MSM never utters a peep…

    It would be great if the people of the United States took note of the Egypt situation and woke-up to understand that f we don’t do the same – our collective situation is bound to get far worse and extremely desperate if we don’t force the government to make changes before we reach the point of no return.

  • John Barnett Brown

    I wonder if a COLA will be passed for Vets and Social Security or if the government will punt, again.

  • John Barnett Brown

    The most ridiculous statistic is that thing called “core inflation.” If heating your house and eating are not core, exactly what is?

  • Anonymous

    Well when you print the dollar with no end in sight, what the hell do you expect? This is why devaluing the dollar is a losing game.

  • Anonymous

    I know one thing I notice for sure is how much SOY is in all of our food. Soy and flour are often used to bulk up items. I also notice at restaurants you will see a lunch deal for $7 (a bit on the high end to me but that’s the norm now) and you’ll have heaps of rice, and like 4-5 tiny chunks of meat, or a hamburger with like a 75-25 bread to meat ratio. I’m really getting sick of this economy.

  • Anonymous

    And those greedy corporations and the very wealthy got that huge tax cut, again!

    The anger world wide is growing, the corporate thieves are getting worried.

  • Helen Wheels

    The so-called conspiracy theorists started telling us this back in mid-summer and of course they were laughed at.

    They also said that food prices are going to soar 30%.

  • Helen Wheels

    Exactly. Didn’t Argentina do this? Didn’t Japan? I guess the US didn’t learn a damn thing.

  • Helen Wheels

    No, they are not worried. They have record profits. THey are on their yachts celebrating and laughing at what fools we all are.

  • grandpatimbo

    Amazing isn’t it how the Tea Baggers and Conservaturds manage to convince people to vote against their best interests?

  • Anonymous

    Some are worried about the situation globally. They have been for a few years.
    Yes, record profits and more, but that doesn’t eliminate the unrest in the world right now, people have had enough.

  • dk504

    >>>The figures showed gasoline prices have leaped over 13 percent in the last 12 months, while grocery prices rose slowly but surely by just over two percent.<<<<

    Gas has leaped over the past 12 months???? Are you high??? 13% in12 days is more like spanky. There is no natural reason for these price increases these prices increases are coming from 1 place WALL ST. and until we the people shut them down and REAL reform is passed this is what going to continue to happen. Pasta prices up 30% in 10 days, WHY? No reason, that wheat was already in the plant before the storms hit.
    I'll bet Gulf seafood is nice and cheap. It is time.