The pinch of rising prices has graduated to a punch after the July 4th weekend, with a host of commonly-used products going up in cost.
Consumer goods makers say they’ve rarely seen anything like it.
As the saying goes, everyone has a plan until they're punched in the face.
“We're in the perfect storm right now,” said Danielle Vincent, chief executive officer at Outlaw Soaps, Inc., a soap products manufacturer in Reno, Nev. “Most manufacturing facilities have been hit hard in the last few years. Production has been impacted globally, meaning material shortages in every stage, from packaging to ingredients.”
Yet consumer demand, for now, remains high. That’s a scenario which no economists had on their roadmap.
“In situations like this, consumers usually retreat into turtle mode,” Vincent said. “The big, historically supported economic idea is to raise the interest rate so companies will raise prices enough to slow consumer spending.”
However, “because of the robust labor market, people are able to demand whatever wages they want, and they're using these higher wages to buy more consumer goods at ever-increasing costs," Vincent added.
Prices Still Rising on Key Consumer Goods
One new study showed that higher prices have accelerated as summer settles in across the U.S.
According to Bankrate, here are the consumer commodities that are seeing the largest cost increases over the past year.
Groceries: 6 of the 10 most inflated items in Bankrate’s consumer staples analysis were grocery store items: eggs (32%), butter and margarine (20%), chicken (17%), citrus fruits (16%), milk (16%), and coffee (15%). Other increases in this category include meat prices (12%), fruits and vegetables (8%), and baby food (13%).
Energy: Gasoline prices are up almost 50% from last year, but Foster cites other home-based increases in the energy category -- utility piped gas service (30%), energy services (16%), cable and satellite television (6%), and water, sewer, and trash collection services (4%).
Personal Care: Prices on personal care items - including for pets - have not climbed this fast since 2009, with pet product prices up 8% and personal care products up roughly 3%. Medical care is also up 4%, while health insurance jumped almost 14%.
Rent: The near 5% increase in this category may seem modest, but it’s the biggest increase since February 1987 in an already large component of many household budgets.
Rising prices are really starting to further wear down exhausted Americans.
“While inflation has been running hot for about a year now, it has really hit home in recent months,” said Ted Rossman, Bankrate senior industry analyst. “Gas prices, already spiking for various reasons, have further accelerated due to the Russia/Ukraine conflict,” said Rossman.
“This is all weighing on consumer sentiment and could hamper what is otherwise expected to be a busy spring and summer travel season,” Rossman noted.
Boomers Feeling the Heat
According to the Bankrate study, a “majority of all generations have noticed higher prices, but the likelihood of feeling the pain of inflation increases with age.” The report offers a generational breakdown of the percentage of consumers who have experienced higher prices over the past year.
--- Baby boomers (ages 58 to 76) – 98%
--- Gen Xers (ages 42 to 57) – 95%
--- Millennials (ages 26 to 41) – 89%
--- Gen Zers (ages 18 to 25) – 83%
While all of the above demographics are feeling inflationary pain, that pain is also linked to severe economic trends.
“The trickiest part of what’s going on now is that we are seeing how interconnected all of these supply chain issues are,” said Anessa Custovic, chief investment officer at Cardinal Retirement Planning in Raleigh-Durham, N.C. “For energy, we had issues with oil and gas during the pandemic when we halted production briefly, then the demand quickly ramped up and we still have yet to catch up to the post pandemic demand.”
Then Russia invaded Ukraine which is pushing up energy inputs for the agricultural industry so now we are also seeing more increases in food prices.
“This is all compounded by the pent-up pandemic demand that has been relentless,” Custovic said.
There is some hope on the horizon.
“We saw core inflation decline for two months in a row,” Custovic noted. “That means goods and services may have plateaued and we are hoping to see a further slowing with the next release. The food and energy component is the most difficult one because monetary policy cannot reign those prices in.”
“We see the housing sector starting to cool off and large purchases are slowing a bit,” she added. “This is good, but the food and energy component is the most serious since we have so little control over them.”
