Higher Prices Heading Your Way

[jeffrey]

Look for prices across the board to be higher in the months ahead. In the past year, many US business have been unable to pass along cost increases they have had to their consumers due to fierce competition and spare capacity. These have kept price increases in check in many areas.

Instead, companies have had to find other ways to offset their growing costs. Many have done this by getting more efficiency from their machines and workers. This has changed with the latest consumer price index report.

With practically no inflation reported in both December and January, the consumer price index rose 0.4% in February according to the Labor Department. While many might imagine that oil was the main culprit in this equation, the index minus both food and energy still rose 0.3% for February.




While prices are now up approximately 3% from what they were a year ago, costs for companies have been rising even faster. Raw materials have risen approximately 11% and the price of finished goods are up about 5% in this same time period meaning that further increases in consumer prices are likely in the months to come.

Further evidence that higher prices are on the horizon come from a PNC Financial Services Group survey of small to medium sized businesses. The survey found that approximately 50% of them are planning to pass along cost increases to their customers this year. This is a 100% increase in the number of companies passing along cost increases from 2 years ago.