Posts Tagged ‘inflation’

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Americans are Spending More (yay!)… But Not Necessarily Getting More (boo)

Saturday, April 2nd, 2011

tiny-egg.jpg
(photo credit:  Eggybird)

Every month for the past eight months, dutiful Americans have been pulling out their wallets and handing their money to other Americans in exchange for goods and services. In other words, they’ve been lubricating the wheels of our creaky economic machine.

Why? Well, part of it is that they’re more confident now that the recession is over and there are real signs of a recovery. But the other, more significant part is that the cost of living increased. That’s right: inflation.

Food and gas prices went up, which means that more of Joe American’s dollars went to feeding his family and driving to work than to buying a new television or a trampoline for the kids.

Ben Bernanke from the Fed says that nobody should be worrying about out-of-control inflation – food and gas prices will come down again. But if he’s wrong, it’s the Fed’s job to take action to make sure Joe still has a few dollars left to pay for his morning coffee after feeding the kids and driving to work.

And by the way… while inflation sounds like a bad thing, it’s really not as bad as its evil twin, deflation.

Have you been spending more money since last summer? Why?

“Woooah There, Economy!”

Wednesday, March 2nd, 2011

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(photo credit: Jakob Montrasio)

China’s economy was on fire even as the rest of the world melted down into a financial puddle. But growth like that can’t last forever, and economic officials are starting to hose down the beast before it gets out of hand.

  • China’s Premier, Wen Jintao, is about to unveil the nation’s next 5-year economic plan, and it seems like there are some serious changes in store for the people of the People’s Republic.
  • Massive growth in the last 30 years brought heavy pollution, widespread corruption, and greater income inequality than ever before. And most of the growth relied on selling goods overseas, which left the local economy underdeveloped.
  • Premier Wen says that the government’s new economic goals are to avoid inflation and restructure the economy so that it doesn’t rely so much on exports. Policies will also try to address the inequality that resulted from billion-dollar industries springing up overnight.
  • Shifting resources to the local economy may mean slower growth, but it may also result in a lot more jobs, as the new service industry can employ more Chinese than factories can.

Facts & Figures

  • China is changing its annual GDP growth target from 7.5% to 7%
  • Over the past 30 years, the annual GDP growth rate has been around 9%
  • Between 2000 and 2009, employment grew by less than 1%

Best Quote

“We’ll never seek economic growth rate and big size at the price of environment. That would result in unsustainable growth featuring industrial overcapacity and intensive resource consumption.” – Premier Wen

What do you think?

If China devotes less of its economy to manufacturing and exporting cheap goods, do you think prices will rise here in the U.S.?

This Fall, Look Forward To High, High Prices!

Friday, February 18th, 2011


(photo credit: Thing Three)

“Most” consumer goods are about to get a lot pricier - food, clothing, appliances, you name it. Why? Commodities, demand, and labor! Here’s what that actually means for you…

  • The cost of raw materials, like cotton, wheat, and metal, has increased wildly in recent years. These raw materials are traded on exchanges kind of like stocks, but they’re called commodities. Just like stocks, the prices of commodities changes frequently.
  • When commodity prices shoot up, it’s more expensive for companies to make their products, and that cost gets passed on to you, the consumer.
  • Besides the price of materials, there’s the cost of people. Workers overseas now demand higher wages than they used to, and with more money to spend, there’s an increased demand for certain goods (like cars and meat). That all adds up to more expensive products.
  • Retailers have been holding off on raising prices to keep customers during the recession, but they say they can’t hold out anymore.
  • Will rising prices lead to inflation? Stay tuned.

Facts & Figures

  • Unemployment in the U.S. is still at 9%, and wages have risen less than 2% in the past year
  • Some brands planning to raise prices include: Nine West, Anne Klein, Victoria’s Secret, Polo Ralph Lauren, Whirlpool, Kraft, Starbucks, Sara Lee, Brooks Brothers, and Hanes
  • Inflation has been low – about 1.4%, but economists expect the rate to rise to 2.5% 2011

Best Quotes

“Consumers are not exactly in the frame of mind or economic circumstances to say ‘Oh, pay whatever they ask.’ There’s going to be pushback.” – Joshua Shapiro, Chief U.S. Economist at MFR Inc.

“These companies are constantly walking a tightrope on how far do I go. Do I offset with price or other cost cuts, or do I just take it and have it eat into my profit margins?” – Jack Russo, Consumer Goods Analyst at Edward Jones

What do you think?

Do you know what goes into the price of the products you buy? Did you ever imagine that the price of popcorn at the movie theater could be connected to weather in the Midwest and a commodites trading floor in Chicago?

Movie Ticket Prices At An All-Time High, To No One’s Surprise

Tuesday, February 8th, 2011

“If you thought it was getting more expensive to go the movies, your hunch was right. The average ticket price at theaters in the U.S. last year rose to an all-time annual high of $7.89, up 5% from $7.50 in 2009, according to the National Assn. of Theatre Owners. In the fourth quarter, the average price was $8.01, up 5% from the year-ago period.”

What do you think?

Can you believe they’re still cheaper than they were in 1970? (When you factor in inflation.)

That Custom-Made Suit Is Going To Cost You

Wednesday, January 12th, 2011


credit: John_Brennan

If you’re not sure what inflation looks like in real life, try asking your tailor. Having suits and dresses made to order in Hong Kong or Singapore used to be the secret to looking good on a budget. But all that is starting to change. Here’s why:

1. Inflation! The apparel industry has been safe from inflation for a long time, but fabric today is more expensive than it was a few years ago. In 2010 alone, the price of cotton in Hong Kong went up by 91%. More expensive materials = a more expensive product.

(And because inflation generally raises prices across the board, tailors are demanding higher wages so they can keep up with the cost of everyday living.)

2. Consumer demand! More people have the money to order custom clothing these days, and tailors and materials are in short supply. That means more work for tailors, and a higher price tag for customers. In other words, the supply of materials and producers has stayed the same, but the demand for finished products has increased. When demand exceeds supply, you’ve got a price increase on your hands.

New Prices:

  • A custom suit made in Singapore with expensive luxury fabric runs about $5,400. A similar suit by an Italian producer might cost $10,000.
  • In 2009, a custom shirt from Singapore cost $177; today it would cost about $330.

“We’re so busy that we’re having to turn some people away.” – Mark Cho, Co-Founder of The Armoury in Hong Kong

How To: Survive A Conversation About The Economy This Week

Friday, January 7th, 2011

Looking for a job or a great deal on a condo? Well Ben Bernanke has some news for you! Our Treasury Secretary and the U.S. Senate got together today for a little chat about the state of the economy. Ben says:

“We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold.”

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credit: kevindooley

The story:
Basically, Americans are starting to spend more money on everything besides real estate. That’s pretty good. But the unemployment rate is still 9.4%, which is bad. In fact, it may take up to five years for the job market to get back in shape.

The plan:
So what’s the plan? First of all, Bernanke practically begged lawmakers to get their rear in gear and rearrange the federal government’s disastrous spending habits (which have led to bigger and bigger budget deficits over the years). And then there’s… quantitative easing!

The important thing you don’t understand but easily could if you just read this:
Friends, it’s time you learned what quantitative easing is. Basically, it’s a way for the government to pump more money into the economy without causing crazy inflation, which would make all that new money worth a lot less.

Here’s how it works: the Treasury prints some money for itself, and uses that money to buy stuff (mostly bonds) from banks and financial institutions throughout the country. Bam! More money in the economy.

But flooding the economy with cash usually causes inflation (which means your dollar will buy less than it used to). So the Fed is working hard to keep the inflation rate below 2%. But you probably don’t need to get into all that detail in a friendly conversation.

So now you know.

Twelve Days of Christmas Presents = $100,000 in 2010

Thursday, December 23rd, 2010

Ever wonder how much five golden rings and a partridge in a pear tree would set you back? No, we haven’t either. But PNC Bank spent a lot of time and money figuring it out and presenting it in an [awesome] online pop-up book for your enjoyment!

To find out how certain prices were calculated, like, say, 12 maids a-milking, check out the USA Today story about the project here.

And for a little retro Twelve Days action, check out John Denver and the Muppets in 1979:

No Increase In Social Security Benefits For 2011

Friday, October 15th, 2010

No cost-of-living increase, no COLA.

  • In 1975, a system was set up to automatically increase Social Security benefits so that recipients (elderly and disabled Americans) could keep up with the cost-of-living increases brought about by inflation.
  • At the end of 2010, the Social Security Administration decided to cancel automatic cost of living adjustment (COLA) because the inflation rate (usually around 3%) was too low to justify it. Now the SSA has decided to cancel the increase for 2011 as well.
  • Despite low the inflation rate, many Social Security recipients have lost money on their retirement investments and the value of their homes.

Facts & Figures

  • Social Security provides benefits for 58.7 million Americans.
  • In 2009, the COLA reached a 27-year high of 5.8%.
  • The average monthly Social Security check is $1,072.

Best Quote

“We’re a little bit upset because our bills are going up and our Social Security isn’t.” – Betty Dizik, 83, Retired Tax Preparer and Social Worker

Purchasing Power is…

Tuesday, March 23rd, 2010

Purchasing power measures of the amount of goods and services that can be exchanged for a unit of currency, such as the dollar, as compared with how much could be exchanged for that amount in a previous time. For example, the number of sodas you could buy now for $1.00 compared to the amount you could buy 50 years ago for $1.00.

Mad About The New Upward Shift In E-Book Prices? You’re Not Alone.

Friday, February 26th, 2010

If you’re not a zealous reader of, well, anything, you may not know about the new literary revelation known as e-books. One of the appealing aspects of these “e-books” is their low prices relative to books printed on paper, but that’s about to change…

  • Various publishers of “e-books,” books that you can read on e-book readers (like the Amazon Kindle or new Apple iPad), have won the ongoing battle for pricing—newly published e-books and bestsellers will go from a flat price of $9.99 to as much as $14.99 each.
  • Unfortunately for the publishers, many avid e-book readers aren’t too keen on this—even going as far as to organize “impromptu” protests, accomplished by going on different e-book websites (e.g., Barnes and Nobles and Amazon) and leaving low ratings and negative reviews for particular books.
  • The central disagreement seems to be over the costs of production; e-book consumers argue that since publishers no longer have to pay for printing, storing and distributing paper-based books, they have no grounds to charge higher prices. Publishers allege that e-book readers are myopic and, frankly, old and cranky, and don’t take into account all the overlooked costs of e-book publishing, like the actual writing, editing and thinking on the part of the author, editors and all the other employees at each publishing house.

Facts & Figures

  • Up until now, e-book prices have hovered around $9.99, a price most e-book readers find quite agreeable.
  • Sometimes publishers will hold off on offering an e-book for a few months so that they can protect sales of the paperback and hardcover versions of the book, prompting hordes of indignant geriatrics to post one-star reviews online.
  • According to a number of online consumer testimonials, iPods, video games and films are good alternatives to books.

Best Quote

“The sense of entitlement of the American consumer is absolutely astonishing. It’s the Wal-Mart mentality, which in my view is very unhealthy for our country. It’s this notion of not wanting to pay the real price of something.” – Douglas Preston, Bestselling Author

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