How much did you pay for your last quick lunch? For your weekly grocery run? For those plane tickets for your family’s vacation?
If you’ve been looking at price tags recently and wincing, you’re not alone. Sure, we’ve all felt the pinch at the gas pump, but prices across many sectors of consumer goods are also on the rise.
The reason for the uptick in cost on things like food, household goods, tools, and travel has a few moving parts. One of the biggest reasons is that simply put, Americans are buying more stuff.
It’s the old concept of supply and demand. Businesses are scurrying to meet the needs of consumers, whose wages are slowly inching up as the unemployment rate dips under 4% for the first time in 17 years.
Consumer prices ticked up 2.1% in April on a year-to-year basis, while producers and suppliers paid 2.6% more. Prices had already risen 1.9% in March compared to the previous year, as indicated by the Federal Reserve’s inflation measure.
Scores of companies have already announced that they will be raising prices, to cover their increased costs. According to a report from CNN Money, last month Stanley Black & Decker’s CEO said, “We’re in business to make money, and in order to do that, we have to achieve price increases to offset some of that inflation.” That’s plain language if you ask me.
Among the businesses and brands that will be upping prices are McDonald’s and Chipotle. Amazon is increasing Prime memberships by 20%, while Netflix raised monthly subscription prices 10% at the end of last year. John Deere recently reported that it plans to raise prices due to the higher costs of materials and freight. (More on freight in a bit.) And not to be left out, Stanley Black & Decker (SWH) put its money where its mouth is, announcing they will kick up prices on their industrial tools.
Borrowing money is also getting pricier. Because the Federal Reserve has been slowly raising interest rates, auto loans are more expensive, as are 30-year fixed-rate mortgages, which have moved above 4.6% and hit a seven-year high.
Now, back to freight, the rising cost of oil is creating heartburn for everyone. Not only are consumers paying more for a fill-up, but we will also end up paying more for goods as manufacturers and suppliers rush to offset increased production, packaging, transportation and delivery costs. Plus, basic freight costs are spiking upwards due to a shortfall in available truck drivers. And let’s not forget about the situation with steel, aluminum, and the anticipated tariffs. Campbell Soup has said that it foresees double-digit increases in these two production essentials.
What’s a consumer to do? While largely out of our hands, prices may not go sky-high just yet, thanks to that basic concept of the American economy – competition.
While Campbell could pass on the increase in expenditures to consumers via steep price hikes, it’s more likely they’ll soften the blow so they can keep pace with Amazon, Kroger, Walmart, and other top retailers. And Campbell isn’t along; both Kroger and Walmart said earlier this year that they had sacrificed lower margins to keep prices down.
This is some consolation, at least, to our wallets. Not to mention that more people are working and employees are generating more income. And if that’s not enough to get you back out shopping, remember that this year’s tax reform likely put a few extra bucks in your pocket, too.
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