Inflation is eating US wage gains
Food, housing, and healthcare costs rose at a 6 percent yearly rate in the past three months.
By Mark Trumbull | Staff writer of The Christian Science Monitorfrom the March 19, 2007 edition
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Brian Fortinberry, who runs Front Range Barbecue in Colorado Springs, Colo., is feeling the brunt of a spike in prices.
Beef costs about 10 percent more than it did in January, he says. Fruit and lettuce are also pricier. Gasoline has gone up, adding to costs when his restaurant does a catering job. And Colorado voters just raised the minimum wage – pushing up his payroll tab.
"We haven't increased our prices, but we're looking to do that," Mr. Fortinberry says. "Eventually you have to pass it along."
The economy may be a bit cooler than it was a year ago, but inflation is still running hot. It's not like the runaway price train of the '70s, but it's enough so that people notice at the grocery checkout, when they pay for day care, or when they buy college textbooks.
Some prices – namely for housing, food, and medical care – have been more noticeable than others of late, jumping at a 6 percent annual rate during the three-month period from December through February, the government reported Friday. Retail gasoline prices rose 7 percent in just two weeks, according to a March 12 report by the US Energy Information Administration.
Of course, not everything is getting more expensive. The core rate of inflation – prices of all goods and services minus volatile food and energy – has been edging up, not soaring, for the past three months. Still, at a 2.6 percent annual rate, inflation is hotter than Federal Reserve officials would like.
Economists are divided over what happens next. Some say inflation is bound to taper off – though maybe not for some months – as the ripple effects of a housing-market downturn cool the economy. Others say that rising prices will persist and that the economy, instead of cooling off, will run close to its speed limit.
"You're going to see continued [inflationary] pressure," predicts Michael Darda, chief economist at MKM Partners, an investment firm in Greenwich, Conn. "Firms will find the pricing power [to pass along increased costs]. I think it is a broad-based issue."
Doug Stoddard, who works at a computer job in Boston, doesn't need government reports to tell him about rising prices. He's seen them in numerous bills over the past year.
"Rent went up. Cable went up. My gym membership went up," he says.
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