Prices are rising, despite what Ben Bernanke and other economists say. You know it if you shop for clothing, food or toilet paper.
While the Federal Reserve chairman publicly frets that inflation is currently at an historic low of 0.8 percent from year-ago levels, shoppers are already being hit in store aisles by the shock and awe of soaring prices, even for some of their most rudimentary purchases.
If you’re an economist, prices on a year-over-year basis are quite tame. But remember where the economy and the US dollar were a mere 12 months ago.
If you shorten your horizon to the last two months, prices have soared.
Indeed, the government’s latest numbers on prices in September — without any of the seasonal adjustments — shows an average 8 percent jump in the cost of materials that manufacturers buy to make goods, and even sharper hikes in retail prices for some products.
In the dairy aisle, milk is up 6.5 percent and butter is up 19 percent from July levels.
Olivio, a butter substitute, and Kimberly Clark’s Scott toilet paper are two examples of stealth recessionary pressures.
Both manufacturers reduced the size of the product while leaving the price the same.
In the cereal aisle, General Mills said it would probably raise prices in the next few weeks on a number of its breakfast cereals.
And most importantly for this Halloween weekend, candy has risen nearly 14 percent in the last month.
McDonald’s also warned it would need to raise menu prices in the near future based on rising commodity costs, such as beef and grain prices.
Retailers are also feeling the pinch. Autumn clothing for women and girls, for example, soared 6.2 percent for September, while footwear to go with the new outfits jumped 3.3 percent in just one month. Besides the pocketbook pain, inflation is seen by Bernanke as a new tool to help steer the economy into recovery.
Earlier this week, Wes Card, CEO of Jones Group, announced the New York-based apparel company, which makes department-store lines like Nine West and Anne Klein, warned that the rising cost of manufacturing, shipping and raw materials like cotton is squeezing margins, and that retailers will likely be forced to raise prices to shore up profits.
Card’s comments were not just company-specific. He said the rising costs in the retail supply chain would force many manufacturers to hike prices to cover their costs.
As a result of Card’s grim view, the Standard & Poor’s Retail Index moved down by as much as 2 percent. Abercrombie & Fitch, Pacific Sunwear and VF Corp. each saw shares drop more steeply than the general markets. Shares of Jones’ archrival Liz Claiborne plunged nearly 6 percent.
Inflation worries are no friend to equities. Wall Street will be keeping a wary eye on what the Fed announces this week in terms of creating too much liquidity, prompting rising prices.
Many analysts say the Fed wants a more robust rise, to a little over 2 percent in inflation, as a policy move, while others call Bernanke’s Quantitative Easing 2 plan — easing of long-term rates through government bond purchases — just backdoor inflation via a weak dollar.
The greenback in the past month alone has tumbled by 2 percent against the euro on investor concerns that QE2 moves could trigger price hikes globally.
Rising prices
Inflation — whether hidden by reductions in product size or an increase in prices — is creeping or in some cases jumping into the economy.
Milk: +6.5%
Butter: +19%
Olivio butter substitute: +6.2%
Woman’s dresses: +6.3%
Candy: +13.7 %
Footwear: +42%
Beer: +6%