Advertisement

Archive for Friday, January 14, 2011

Higher commodity prices may spur inflation

January 14, 2011

Advertisement

— Rising wholesale prices for food and energy are putting pressure on manufacturers and retailers to pass higher costs to customers. It’s a trend that could raise inflation in the United States and slow economies in Asia and Latin America.

U.S. gas prices have topped $3 a gallon, and grain prices have reached a 2 1/2-year high. Some lawmakers say the increases illustrate the need for tighter limits on speculation in commodities markets.

Airlines, clothing manufacturers and some grocery stores have already raised retail prices. And even those companies that have resisted increases because they worry that customers can’t afford them may be more reluctant to hire because of the squeeze.

Some economists expect prices to rise faster this year than last, although not fast enough to cause policy changes at the Federal Reserve, which has the power to raise interest rates to keep inflation in check.

And though the higher prices could be a drag on consumer spending, they shouldn’t derail the overall economy, economists say.

The price of corn, soybeans, wheat and other grains has shot up since last summer as bad weather has hammered harvests in Russia, Australia and Argentina. That raises the cost of feeding livestock, and in turn raises prices for beef and poultry. Oil prices, currently at about $92 a barrel, are rising because of strong demand from fast-growing developing countries.

Wholesale prices rose 1.1 percent in December, the Labor Department said Thursday, the biggest increase in 11 months. Higher energy and food costs drove the increase. So-called core prices, which exclude those volatile categories, rose just 0.2 percent.

But the report can’t be dismissed just because most of the increase came in food and energy prices, said Joel Naroff, chief economist at Naroff Economic Advisors. “These are not products which you can do without very easily,” he said.

Last year, Americans spent about 8 percent of their money on energy, which includes natural gas, electricity, gasoline and motor oil. They spent about 13 percent on food.

Comments

Liberty_One 3 years, 11 months ago

Gee whiz, how long have I been predicting this? Worthless Bernanke bills are not the solution to our economic woes. Now we have a recession AND inflation. Thanks Obama and Bernanke!

But you know what, very few will read this article. People care more about some Islamic community center in Manhattan than they do about commodity prices and inflation, even though this is a far more important issue in their day-to-day lives than they know.

kernal 3 years, 11 months ago

I'm sure the global food crisis, which has been predicted, has absolutely nothing to do with this.

just_another_bozo_on_this_bus 3 years, 11 months ago

So Glenn Beck tells you to hate Piven, and you goosestep right into line, even though you know nothing about her.

You're pitiful.

just_another_bozo_on_this_bus 3 years, 11 months ago

This comment was removed by the site staff for violation of the usage agreement.

itwasthedukes 3 years, 11 months ago

Yet we keep hearing reports that say there is no inflation. Has anyone else noticed the large decrease over the last few years in the number of ounces of food product you get for your money. When I was young a granola bar had to be at least double the size of one today. If the price has not changed my guess is the inflation numbers do not calculate per ounce price which makes the calculated number even less accurate.

kernal 3 years, 11 months ago

Oh, yes. If the food packaging isn't smaller, then less is still being put in it. I noticed last week that the bagels I buy had been reduced from five per package to four and in comparing with other older products in the pantry, twenty percent of the food that is packaged is in smaller containers.

The Austrailian floods aren't helping. Remember when Australia's sheep were pretty much wiped out by disease? That's why we've not seen much wool in the stores for the past few years and the price has gone up. Australia exports a lot of food to other countries that will not be available for awhile, thus food commodities are also going up.

I've said it before and I will keep saying it. There is not enough tillable land in the U.S. to feed us, we are importing tons of food; read the packaging on what you buy. This is one of the reasons we need to quit using good farm land for industrial expansion before utilizing existing industrial land. The U.S. Agricultural department also needs to take some of the money for the corporate farms to the smaller independent farmers and promote sustainable agricuture.

What is also adding to the cost of our food is the cost of transporting it, the food companies advertising, food processing (which turns much of it into junk food) and new packaging. I wonder just how much of our food dollar is spent on the ridiculous advertising, especially those ads to get your kids whining in the stores for unhealthy foods. How much does importing food from China or South America add to your food cost?

Since no one seems to care about the environmental footprint of food imports and processing, perhaps the cost to your billfold will.

Fossick 3 years, 11 months ago

Rising wholesale prices are not the cause of inflation, they are the result of it. Inflation is always and everywhere a monetary phenomenon.

Commenting has been disabled for this item.