Longtime readers know I have sounded this warning in the past, but today the McClatchy Washington Bureau has come out with an article on the sharp increases in the price of many staple foods. While overall inflation remains low, the prices for many common foods are jumping by double digits.
MIDLAND, Va. — The Labor Department’s most recent inflation data showed that U.S. food prices rose by 4.1 percent for the 12 months ending in June, but a deeper look at the numbers reveals that the price of milk, eggs and other essentials in the American diet are actually rising by double digits.
Already stung by a two-year rise in gasoline prices, American consumers now face sharply higher prices for foods they can’t do without. This little-known fact may go a long way to explaining why, despite healthy job statistics, Americans remain glum about the economy.
Meeting with economic writers last week, President Bush dismissed several polls that show Americans are down on the economy. He expressed surprise that inflation is one of the stated concerns.
“They cite inflation?” Bush asked, adding that, “I happen to believe the war has clouded a lot of people's sense of optimism.”
But the inflation numbers reveal the extent to which lower- and middle-income Americans are being pinched.
The Bureau of Labor Statistics said in its June inflation report that egg prices are 19.5 percent higher than they were in June 2006. Over the same period, according to the department’s consumer price index, whole milk was up 13.3 percent; fresh chicken 10 percent; navel oranges 19.8 percent; apples 11.7 percent. Dried beans were up 11.5 percent, and white bread just missed double-digit growth, rising by 9.6 percent.
These numbers get lost in the broader inflation rate for all goods and services, which measured 2.7 for the same 12-month period. Across the economy, rising food prices were offset by falling prices for things bought at the mall: computers, cameras, clothing and shoes.
McClatchy may actually have this pinned. People are reminded frequently about high gas prices and sharp increases in the cost of foods. That may be exactly why there is so much economic gloom among the voters. People see it every day and it is beginning to pinch. But what is fueling these increases? (Pun intended.)
It's partly because of corn prices, driven up by congressional mandates for ethanol production, which have reduced the amount of corn available for animal feed. It's also because of tougher immigration enforcement and a late spring freeze, which have made farm laborers scarcer and damaged fruit and vegetable crops, respectively. And it's because of higher diesel fuel costs to run tractors and attractive foreign markets that take U.S. production.
I do not, for a moment, buy the immigration issue they raise. That is a red herring. Most of the products they cite as increasing rapidly are ones that do not rely on large (illegal) labor resources. Fuel, though, is a double whammy: higher fuel prices mean higher transport costs and higher food prices; increased demand for ethanol for fuel causes higher food prices. All thanks to your friendly Congress. And don't forget, the Democrat-controlled Congress is eying still more tax increases which will drive up the cost of fuel. Transportation costs will increase still further and the price of food will continue to spiral upward out of control.
Based on my experience, it looks like the government is cooking the books on inflation. Most of my expenses have doubled in the last two or three years. I think fast food is up about 35% in the last 3 years or so. Leather boots seem to be up about 25% in the same time frame. Housing has been on fire until recently. I have also noticed some product quantities getting smaller but selling for the same price. Probably not picked up as inflation, but it is just the same. Seems that they would have to really hunt and cherry pick to come up with 2% inflation.