CHICAGO — Consumers had cause to cheer, or at least applaud politely, this week when the government forecast summer gasoline prices slightly below last year’s.
The outlook may not be as benign for visits to their favorite supermarkets and restaurants, among other destinations — and perhaps for rates on their credit card and mortgage bills, either.
Prices on everything from cereal and milk to soft drinks and red meat are on the upswing, due partly to the ethanol and biodiesel boom which is pushing up prices for corn and other commodities. High energy prices also remain troublesome, regardless whether gas tops $3 a gallon, and clothing costs are up this year too.
All that explains why Federal Reserve policymakers cited “uncomfortably high” inflation readings as being their biggest worry, according to minutes released Wednesday of their private discussions last month.
“It feels like we could be in for a period of higher inflation at our stores and restaurants, for a year or two or three,” said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pa.
The government reported Friday that wholesale prices rose 1 percent in March, mostly because of the biggest jumps in energy (3.6 percent) and gasoline (8.7 percent) prices since November.
Prices were flat for the month on a wider range of goods that excludes food and energy. While that suggests inflation is not yet in danger of spreading throughout the economy, the news offers little solace to many consumers already feeling greater pressures on their pocketbook spending.
Jessica Parks, a work-from-home mom in Summerville, Ga., said she’s cut back on regular family outings to restaurants and bowling alleys. “There’s just no room in the budget,” said Parks, who works for a customer service company. “With children especially, the cost of clothing and everything and the grocery bill is getting worse.”
After losing the family home in a fire last December, she bought replacement clothes for the kids online and at a local Wal-Mart and was appalled to find it cost $700 instead of the roughly $400 she was anticipating. The most recent shock came when a single cartful of groceries came to over $300.
“It’s hard to deal with,” Parks said. “And a lot of people are asking why. Everything’s just getting to be outrageous.”
One familiar irritant, the price of gasoline, has soared well above $3 a gallon in some places this spring. That could be temporary. The Energy Information Administration said in a forecast released Tuesday that the recent spike in prices should ease in coming weeks.
But even that will leave the expected nationwide cost of a gallon of regular-grade gas this summer at an average $2.87, comparable to last year’s $2.90.
Adding to the pinch, apparel prices on spring merchandise have been up. And dairy economists predict the retail price of milk could jump 9 percent by fall.
This may all sound familiar to those who remember experts fretting about food prices edging up a year ago while gasoline made its seasonal warm-weather surge. But Carl Tannenbaum, chief economist at LaSalle Bank in Chicago, says he’s concerned that productivity growth is slowing down, labor costs are rising, and food, energy, health care and education costs are on the move — all at the same time.
The year-over-year change in the consumer price index, which is heavily influenced by energy prices, has been running at 2.7 percent to 2.8 percent, about the highest it’s been in the past year. The next report, for price changes in March, is due out Tuesday.
“I’m not suggesting inflation’s going to rage out of control,” Tannenbaum said. “But especially given that the (Fed’s informal) target is 2 percent, we seem to be moving quite a bit away from it.”
Will Smith, a 53-year-old security guard from Cambridge, Mass., has seen higher prices lately for everything from fruit to clothing to entertainment. He recently went clothes shopping in hopes of finding end-of-season bargains and winter closeouts but came away disappointed.
“A shirt that was $45 last year is $52 now. A suit that was $250 is $305 now,” Smith said.