Price hikes make for high anxiety

Basic costs, such as for energy and food, are rising at a more rapid pace - and wages aren't keeping up, according to new statistics

BY RANDI F. MARSHALL MONTY PHAN AND LAUREN WEBER
STAFF WRITERS

March 24, 2005

Led by spikes in the cost of energy, medical care and transportation, consumer prices nationwide increased in February at 0.4 percent, their fastest pace in four months, according to a Labor Department report released yesterday.

Annual inflation, as measured by the broadly used Consumer Price Index, stood at 3 percent.Even without factoring in energy and food, the report said, inflation rose 2.4 percent in the last year.


The price gains worried some experts. But others suggest the concerns are a bit overblown because the factors driving this inflation - including energy costs - might not hold up longer term.

"I don't think this is an inflation genie that's going to get its full head out of the bottle," said Anthony Chan, senior economist with JP Morgan Asset Management.

Meanwhile, wages aren't keeping up with consumer prices. Real average weekly earnings fell 0.4 percent in February, the biggest drop since November, the Labor Department reported.

That combination of rising prices and falling wages won't equal a stellar, growing economy, experts agreed.

"It's hard to imagine a robust or broadly experienced expansion at least from the perspective of working families, if their wages are falling behind inflation month after month," said Jared Bernstein, an economist with the Economic Policy Institute, a Washington, D.C.-based liberal think tank.

Prices in the New York metropolitan area, meanwhile, rose even faster than the nation, gaining 3.9 percent over last year, according to Michael L. Dolfman, regional commissioner for the Bureau of Labor Statistics. And the gains were fairly broad-based, encompassing food, medical care, transportation, clothing and housing, according to the regional data, which include New York City, Long Island and northern New Jersey.

"It's not just an energy story in New York," Dolfman said.

Indeed. According to Westbury resident Vera McIntosh, costs are rising everywhere, from cable to groceries.

"Whenever you go to the store to buy food, you're coming home with less and less bags," said McIntosh, 64, who is retired and living on a fixed income.

Part of the problem, experts noted, is that energy costs, which rose by 10.4 percent since last February, are now seeping into the rest of the economy. Economists also point to the other significant source of rising prices - medical care, which rose 4.3 percent annually. "That's the problem," said David Wyss, chief economist with Standard and Poor's. "The two places where you're seeing inflation right now ... are sectors which really ripple through the economy."

But if incomes don't grow faster, workers will likely stop buying - potentially halting inflation in its tracks, said James Glassman, senior economist with JP Morgan/Chase.

"The real check on inflation is demand," he noted.

Ouch!

Here's how much breakfast and gas have gone up in a year. 2004/2005

White bread, 1 lb.

$0.94/$0.98 (Up 4%)

Bacon, 1 lb.

$3.19/$3.40 (Up 7%)

Whole milk, 1 gallon

$2.81 / $3.18 (Up 13%)

Butter, 1 lb.

$2.79/$3.53 (Up 27%)

Coffee, 1 lb.

$2.86/$2.94 (Up 3%)

Grapefruti, 1 lb.

$0.67/$0.99 (Up 47%)

Regular unleaded gas, 10 gallons

$18.77/$21.37 (Up 14%)

Link: http://www.newsday.com/business/ny-bzec ... -headlines

Catherine