Inflation Everywhere!!!https://www.marketwatch.com/story/10-everyday-things-getting-slammed-by-inflation-2014-06-27
By Jeff Reeves, MarketWatch
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Critics of the Federal Reserve have been warning for years that easy-money policies are bound to result in faster inflation.
And while inflation remains well within historical norms, the sharp 2.1% increase in consumer prices this May has many inflation hawks sounding the alarm bells.
I think hyperinflation fears are overdone. One-time drivers of higher food prices, such as the recent drought in California coupled with a cold snap to start the year, should not be seen as a sign of an inflationary spiral that will continue unabated.
Furthermore, the sad reality of stagnant wages means that consumer prices don’t have much wiggle room — because many family budgets don’t have much wiggle room, either. If businesses keep increasing prices, then they are going to force consumers to make hard choices — and could actually depress sales as a result.
How central banks' monetary policy affects markets
But whatever the long-term trend in inflation or the broader impact on consumer stocks and family budgets, it’s undeniable that prices are on the rise. And for certain expenses, the prices are moving higher very fast, and that could have a significant impact on investors.
Here are 10 items worth watching as Wall Street turns its attention back to inflation trends in 2014:
Health-care spending: Immediately after the Obamacare rollout, there was a lot of kerfuffle about how health-care spending had finally started to flatline after years of big increases. Well, looks like health-care price inflation is back in 2014; a recent study by PricewaterhouseCoopers’ Health Research Institute indicated medical costs will rise 6.5% this year and 6.8% in 2015 . That could impact health-care policy makers as Obamacare becomes a focal point in the midterm elections, of course. But, most importantly, it could affect seniors on a fixed income without much of a spending cushion.
Gas prices: The average price for a gallon of gas is creeping up on $4 once again. Thanks to fears of oil supply disruption amid unrest in Iraq, the average price for a gallon of midgrade gasoline is up to $3.90, according to a recent Trilby Lundberg survey , and regular unleaded is at $3.71, up 2 cents from the previous week. The real story isn’t that gas prices have risen, but that oil prices have risen even more; crude oil is up over 20% in the past year to well above $100 a barrel, but much of that price increase hasn’t been passed on to consumers ... yet.
Housing: While the real estate market is cooling, the S&P/Case-Shiller index of home prices in 20 major cities rose again in April, and the past year has seen housing prices increase 10.8% . Additionally, thanks to a lack of supply and increased demand, rental prices are rising briskly too; rents were up 3.2% in 2013 and low vacancy rates in most areas hint that future increases are on the horizon.
Pork prices: Over the past year, a virus has been sweeping through farms and killing piglets by the millions, holding down the supply of pork and driving up the prices. U.S. lean hog futures set an all-time high a week ago , and pork prices are up 50% in the past year.
Beef prices: Lest you think it’s only pig-borne disease driving up pork prices alone, note that beef is getting more expensive too. U.S. beef prices are up 74% since 2009, and cattle futures are up 22% in the past year alone. And beef prices continue to set record highs even as feed prices drop.
Chicken prices: With all that expensive pork and beef, consumers are changing their shopping habits to purchase cheaper meat. However, that means huge demand for chicken — and big demand is starting to drive up those prices too. Bloomberg reports that boneless, skinless chicken breasts are up 23% in price this year and could hit $2 per pound by July because of supply bottlenecks. Americans are eating the most chicken in three years.
Orange juice: It’s not only meat prices, either. According to the BLS, a broader index of food prices posted its largest increase since August 2011. Consider that orange juice prices are up 3% over the past year even as pricier OJ has led to a steep drop in consumption . Normally, when demand drops, you should expect prices to abate. But a bacterial disease affecting Florida citrus groves continues to keep supplies low and prices high even as shoppers opt for cheaper beverages.
Milk: Whole-milk prices are were up 7.5% in April over the previous year, and at $3.69 per gallon the price was the highest since September 2011 . Unlike some of the other foodstuffs on this list, however, domestic conditions have little to do with milk pricing; strong demand from middle-class consumers in South America and Asia is fueling a surge in exports. And unfortunately, consumers shouldn’t expect this trend to abate anytime soon as emerging market appetite for milk and cheese grows.
Coffee: Folgers, Dunkin Donuts, Maxwell House and others have been increasing the prices of their coffee thanks to recent drought conditions in Brazil. The disruption in coffee crops there has resulted in tight supplies around the globe — and higher prices for consumers. As a result, Arabica bean production will likely be down 8 million bags this year.
Produce prices: Though wholesale prices dipped in May, that drop was unexpected and comes on the heels of big gains in the previous two months. Furthermore, the annualized rate of producer-price inflation is still running at 2%. That’s down only slightly from the 2.1% pace in April, the highest level since 2012. PPI has been volatile, but it seems like the long-term trend is still higher for businesses, meaning it’s only a matter of time before those input costs get passed on to consumers.
Jeff Reeves is the editor of InvestorPlace.com. Follow him on Twitter @JeffReevesIP.