Grocery, gas and electricity prices surge as inflation warnings grow

The US economy is roaring back to life after stalling out during the pandemic, but there are warning signs flashing that could hit consumers right in the pocketbook. 

Measures of inflation - or the prices of goods and services that we all pay - are rising much more quickly than experts like to see. If those price increases get out of control, then the economic boom is likely to come to a screeching halt.

And many signs of inflation are already here - with the prices of groceries, household items, gas and electricity, for example, all surging over the last year. 

The average price of coffee is now up nearly 8 percent compared to last year, while the price of bread is up 11 percent, according to Bureau of Labor Statistics data. 

The Personal Consumption Expenditures Index, or PCE, is one of the government's guides to price increases in goods and services: It rose 3.5 percent in the first three months of the year compared to a 1.7 percent rise in the same period in 2020. 

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That's the second-fastest increase since 2011 - and way above the rate considered 'just right' of 2 percent.

Prices are rising likely because of pent-up demand from people who are just now emerging from pandemic lockdowns and flush with cash from stimulus payments. There's also a crimped supply of some goods as supply chains have gotten gummed up - with some countries still in the throes of fighting the virus and not producing the amount of particular goods they normally would. 

Meanwhile, food prices in general have already increased 3.5 percent over the past year and energy prices are up 13 percent. 

The prices of raw materials - such as steel, lumber and cotton - that are used to make everything have also been surging. 

Companies have already said they will be passing on the higher costs of those raw materials onto consumers.     

Signs of inflation are already here in the United States with the prices of groceries, household items, gas and electricity, for example, surging over the last year

Signs of inflation are already here in the United States with the prices of groceries, household items, gas and electricity, for example, surging over the last year

The consumer price index, which is the best-known measure of inflation, rose 2.6 percent in the 12 months to March - marking the largest year-over-year increase in three years. Food prices in general have already increased 3.5 percent over the past year and energy prices are up 13 percent

The consumer price index, which is the best-known measure of inflation, rose 2.6 percent in the 12 months to March - marking the largest year-over-year increase in three years. Food prices in general have already increased 3.5 percent over the past year and energy prices are up 13 percent

Consumer goods supplier Procter and Gamble, for example, have said it will hike prices on items like diapers and feminine care come September because of an increase in the cost of cotton. 

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And appliance maker Whirlpool has already increased prices by 5 to 12 percent to deal with rising steel costs. 

While federal Reserve Chair Jerome Powell has insisted he can keep inflation under control and that any surge will be temporary, economists on both sides of the political spectrum are already predicting the most painful inflation in decades. 

Another gauge of inflation, the consumer price index, which calculates the prices paid on a basket of commonly used goods, also is running hotter than experts say is ideal: It rose 2.6 percent in March when compared to the same period the year before.

Billionaire Warren Buffett warned on Saturday that he was indeed seeing 'substantial inflation' within his conglomerate of businesses, saying: 'We are raising prices. People are raising prices to us and it's being accepted.'  

The average American should care about inflation because it affects the value of their dollar: For every tick it goes up, their dollar becomes worse less. 

Some inflation is good - as everyone wants a higher paycheck, for instance - but when it rises too quickly, paychecks don't keep up with price rises. 

And when inflation gets out of control - when it expands much faster than the 2 percent level that the Federal Reserve has set as a general target - then that can cause economic problems - even a recession. 

Here is a breakdown of how we are already seeing inflation creep into the US economy:

Groceries:

According to the Bureau of Labor Statistics' monthly consumer price index data, the average price of bacon was nearly $6 per pound in March - an increase of 11 percent compared to last year. 

Bread, on average, now costs $1.50 per pound, which is up 11 percent in a year. A pound of coffee costs $4.60, which is an 8 percent increase compared to a year ago. 

The cost of a whole chicken has increased by an average of 10 percent in the last year at $1.50 per pound.

Meanwhile, a dozen eggs, on average, is now 6.5 percent more expensive at $1.60 per dozen, while the cost of a gallon of milk is up 3 percent. 

Bananas now cost about 60 cents per pound, which is a 3 percent hike. Oranges have increased 8 percent and now cost about $1.20 per pound. 

The average price of bacon was nearly $6 per pound in March - an increase of 11 percent compared to last year, according to the Bureau of Labor Statistics' monthly consumer price index data

The average price of bacon was nearly $6 per pound in March - an increase of 11 percent compared to last year, according to the Bureau of Labor Statistics' monthly consumer price index data

Bread, on average, now costs $1.50 per pound, which is up 11 percent in a year

Bread, on average, now costs $1.50 per pound, which is up 11 percent in a year 

Gasoline and electricity:

The recent surge in the monthly consumer price index was driven largely by an increase in the price of gasoline.  

The average price of gas has surged 22 percent from March 2020, according to Bureau of Labor Statistics data. 

It now costs, on average, about $2.8 per gallon.

Gas prices are only expected to rise. 

The Energy Information Administration predicted last month that prices will surge this summer to three year highs. 

Average prices of electricity, per kilowatt hour, is up 3 percent compared to last year. The cost is now about 13 cents per kilowatt hour. 

GAS PRICES: The average price of gas has surged 22 percent from March 2020, according to Bureau of Labor Statistics data

GAS PRICES: The average price of gas has surged 22 percent from March 2020, according to Bureau of Labor Statistics data

The recent surge in the monthly consumer price index was driven largely by an increase in the price of gasoline. The average price of gas has surged 22 percent from March 2020 and now costs, on average, about $2.8 per gallon

The recent surge in the monthly consumer price index was driven largely by an increase in the price of gasoline. The average price of gas has surged 22 percent from March 2020 and now costs, on average, about $2.8 per gallon

ELECTRICITY PRICES: Average prices of electricity, per kilowatt hour, is up 3 percent compared to last year. The cost is now about 13 cents per kilowatt hour

ELECTRICITY PRICES: Average prices of electricity, per kilowatt hour, is up 3 percent compared to last year. The cost is now about 13 cents per kilowatt hour

Inflation saps the value of your dollar: This is how it works 

Have you ever been shopping and noticed that the prices of things you typically buy have gone up? If the items in your shopping basket cost $100 last year and now they cost $105, at a very basic level, that's inflation. 

Prices are changing all the time but we don't say there is inflation every time we see a price increase. 

Instead, we say there is inflation when the prices of many of the things we buy rise at the same time and then continue to rise.  

So how can we tell when inflation is happening and by how much? We do so by looking at the prices of many items over time. Government statistical agencies regularly gather information about the prices of thousands of goods and services. They then organize the prices into categories such as 'transportation' and 'apparel,' they combine the prices in each category, and they report the results in various price indexes.

Price indexes are just collections of prices. For example, some indexes contain the prices of items that consumers buy, and others contain the prices of items that businesses buy. Others contain prices only for goods, while others contain prices only for services, and so on. If the level of an index is higher now than it was a month or year ago, it tells us that the prices contained in that index are higher on average, which tells us there is inflation.

Source: Federal Reserve Bank of Cleveland

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Household items and supplies:

The cost of household items like appliances and furniture have also increased compared to a year ago.  

The average cost of furniture and bedding has increased 3.5 percent in the last year, Bureau of Labor Statistics data shows.

Major appliances, such as fridges, are up 15 percent. The price of household cleaning products has increased 3 percent.

The companies behind well-known American brands have already said prices will, or have already, increased further due to inflation. 

Procter & Gamble, the company behind Tide, Bounty, Gillette and Pantene products, has already said it will have to increase prices by single digit percentages from September. The increases will

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