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Business

Prices creeping up as energy, other costs increase

You're not just imagining that budgetary pinch
By Dan Sewell
the associated press
Tucson, Arizona | Published: 08.31.2006
CINCINNATI — While prices at the gas pumps get a lot of attention, other increases are pulling at Americans' pocketbooks from a variety of directions.
"We see it daily as far as everything we need for the kids; groceries, the little one still in diapers; anything that has to do with the house," said Mary Ann Ray, 32, a registered nurse and mother of two in suburban Union Township just east of Cincinnati.
Besides spending $10 to $15 more to fill up her minivan than she did a year or so ago, she ticks off other higher prices squeezing the once-comfortable household budget of her and her husband, the product development director for an educational software company. They include over-the-counter drugs, delivery pizzas, baby formula.
The ripple effect into the everyday economy as big companies try to offset increased costs for energy, transportation and raw materials is a creeping inflation that economists are watching, as the Federal Reserve balances inflation concerns against a slowing economy. While recent economic data indicated that inflation pressures are easing, consumer surveys show inflation worries are contributing to declining confidence about the economy.
And more price increases are coming.
In summer earnings reports, company after company has reported plans to pass along some of their higher costs in pricing of products, from Energizer Holdings Inc.'s batteries to Eastman Kodak Co. film; Whirlpool Corp. appliances to Anheuser-Busch Cos. Inc. beer .
Some small-business owners are feeling the ripples, too.
"My costs have gone up. Shipping has definitely gone up," said Toni Sander, who sells gourmet foods and coffees, gift baskets and fine wines at her store, The Wine List, in the northern Cincinnati suburb of West Chester. "Shipping bills are half the cost of some of the food orders."
The federal Labor Department reported a July core consumer inflation increase of 0.2 percent, the lowest in five months. But core inflation, which excludes energy and food, has risen by 2.7 percent over the past 12 months.
Jay McIntosh, Chicago-based Americas director for retail and consumer products for Ernst & Young, said while the costs of gasoline, health-care costs, college tuition and other areas have been rising steadily for years, some everyday items are climbing now, too.
He said that large companies that have kept prices down by cutting back internally or increasing productivity are facing increasing pressure because of spiraling energy and commodity prices fueled partly by growing consumption by China.
James Brock, a Miami University economics professor, said "the $64,000 question" is how much longer companies can keep rising costs from spilling heavily into the consumer marketplace.
"The question is when does that really start to show up at the retail level and the cash register," he said. "Honestly, I've been surprised that it hasn't shown up more than it has."