Tag Archives: Consumer Affairs

Buy Your Canned Goods Now!

Associated Press:

Wholesale prices jumped last month by the most in nearly two years due to higher energy costs and the steepest rise in food prices in 36 years. Excluding those volatile categories, inflation was tame.

The Labor Department said Wednesday that the Producer Price Index rose a seasonally adjusted 1.6 percent in February — double the 0.8 percent rise in the previous month. Outside of food and energy costs, the core index ticked up 0.2 percent, less than January’s 0.5 percent rise.

Food prices soared 3.9 percent last month, the biggest gain since November 1974. Most of that increase was due to a sharp rise in vegetable costs, which increased nearly 50 percent. That was the most in almost a year. Meat and dairy products also rose.

Scott Johnson at Powerline:

I believe that food inflation is in the midst of its greatest run-up (by one measurement of a basket of basic foodstuffs) since 1974. The lead story on Drudge reports on the most recent data.

Under the rubric of QE2, the Federal Reserve Bank is engaged in the venture of increasing the money supply with the goal of moderately increasing inflation. I fear that this venture is misguided and destructive. I believe it will result in inflation exceeding the Fed’s goal, if it has not done so already, and that the Fed will apply the brakes well after the damage has been done, as is its style.

What sayeth the Fed?

Ed Morrissey:

Scott cleverly titles his post, “Let them eat iPads.”  I’m not sure I’d draw a line between QE2 and what has happened in food and oil prices, at least not as a primary factor.  The effect of QE2 will be to weaken the dollar, which will hike the cost of imports, to be sure, and that may account for a little of the large price jump.  If it was the main factor — if the dollar had been weakened to that extent — then prices would be up across the board, especially on imports.  At least according to today’s report from the BEA on the trade deficit, that doesn’t appear to be the case.

The real source of this problem is America’s continuing refusal to exploit its own energy sources.  We remain too dependent on imports for energy while deliberately sidelining at least hundreds of thousands of potential high-paying jobs by refusing to extract our own oil and natural gas.  When the unstable countries that produce oil go through political paroxysms, it spooks investors and sends commodity prices soaring on the increased risk to distribution.  Those price increases mean higher transportation costs, which impacts all goods and services that require transport to get to consumers.  It’s a multiplier factor that we have seen a number of times over the last four decades, and which our political class continues to pretend doesn’t exist.

Ron Scherer at Christian Science Monitor:

In the year ahead, expect to see the largest food price increases in the protein group: chicken, beef, and pork, as well as dairy items. One key reason: The price of corn, used as feed by ranchers and farmers, has doubled in the past year. But vegetarians won’t get off easy: Produce and orange juice are rising sharply, as well.

Higher food prices have wide economic ramifications and are being watched closely by the Federal Reserve. From a business standpoint, food producers – from agricultural giants to the corner pizza parlor – must raise prices or watch their profit margins evaporate. Many middle-class households are financially stretched to the limit, so any extra expense for such basics as milk or bread makes their life even tougher. Organizations that help the poor with food, moreover, find they can’t help as many people because their dollar doesn’t go as far.

“The more you have to spend on a loaf of bread and a pound of ground beef, the less you have to spend on everything else,” says Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pa. “It’s like a tax increase, although it’s not quite as bad as rising oil prices, since at least the revenues go to US farmers, truckers, and ag-equipment manufacturers.”

The US Department of Agriculture expects the average price of food in 2011 to be 4 percent higher than last year. Some private forecasters say that, by December, prices could be as much as 6 percent higher than in December 2010.

“If food inflation comes in at 6 percent, it would be the most dramatic increase since 1982,” says William Lapp, a consumer foods economist with his own firm, Advanced Economic Solutions in Omaha, Neb. “We had a 10-year period, from 1972 to 1981, when annual food prices rose sharply – including a two-year period when increases averaged 8.7 percent.”

Mark Huffman at Consumer Affairs:

When you factor in crude foodstuff and feedstuff to food costs to producers, food prices rose at the fastest rate since 1974, when the U.S. economy was in the grips of what was known as “stagflation.” Prices were rising rapidly despite little or no growth in the economy.

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