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Blame Europe For Higher Grocery Bills

While inflation remained in check for December, gas and food prices continued to rise. The culprit, say some experts:  Europe.

Sluggish auto sales and steep discounting by retailers are responsible for keeping inflation level, experts say. The Consumer Price Index was flat in December, according to data released today — less than the tepid 0.1% rise expected by economists surveyed by Dow Jones Newswires. But “no one really believes that inflation has subsided,” says Robert Schmansky, founder of Clear Financial Advisors in Bloomfield Hills, Mich. In fact, inflation rose 3% on the year in December — twice the 1.5% rise in 2010 the biggest annual rise in four years — largely due to higher gas and food prices.

Experts say those prices are expected to keep rising. Mark Perry, visiting scholar at the American Enterprise Institute in Washington, D.C., sees higher inflation this year than last. Thanks to Europe’s ongoing debt crisis, the dollar is likely rise against the euro and push up gas and food prices, says David Abuaf, chief investment officer at Hefty Wealth Partners in Auburn, Ind. “Until there’s some sort of solution in Europe, the value of groceries and gas here will rise,” he says, predicting that gas will jump another 10% and food 4.7%, the same rate as last year. “The price of everything from cotton to pig will be more expensive.”

For their part, consumers may increasingly move away from their favorite local supermarkets for their groceries and buy more in bulk at big box retailers, which are better able to resist significant price increases, says Abuaf. As a result, retailers will be under pressure to absorb higher prices, particularly on items less sensitive to inflation such as electronics (TVs rather than tablets and smartphones), Schmansky says. “Most consumers are still in the mode of trying to conserve and save, look for deals and they should continue along that path,” he says.

There are also ways to keep track of gas prices. Crowd-sourced apps like GasBuddy.com have around 500,000 users who give daily updates on what gas stations give the best value. For those planning big summer road trips, the most volatility will occur during hurricane season from August 1 through September 15, according to Patrick DeHaan, senior petroleum analyst at GasBuddy.com. There are simpler ways, too. DeHaan says drivers can save about 1 cent to 3 cents per gallon by buying non-branded fuel as gas stations pay more to be associated with a household brand, “and the majority of drivers could increase their gas mileage significantly just by slowing down a bit,” he says.

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    • AEI, really? Couldn’t get a member of the John Birch Society to blame Al-Qaeda for the rise in oil prices and food costs?

    • Chris wrote: “the U.S. Govt. needs to stop encouraging Americans to have more kids” WRONG, WRONG, WRONG! We need more children to sustain the future productivity of the country. Kids are an investment in an important future asset, not net loss as one might infer from Chris’ comment.

      The U.S. Govt needs to get smaller, spend less, reduce entitlements, and reduce regulations. A free market with little government intervention will lead to prosperity. This is basic economics.

    • Regardless of whether the Dollar or Euro rises, the U.S. Govt. needs to stop encouraging Americans to have more kids than they can afford via tax breaks: The Rising Cost of Raising a Child
      By J. Dickler September 21, 2011: NEW YORK (CNNMoney) — Forget designer strollers and organic baby formula, just providing a child with the basics has become more than most parents can afford. The cost of raising a child from birth to age 18 for a middle-income, two-parent family averaged $226,920 last year (not including college), according to the U.S. Department of Agriculture. That’s up nearly 40% — or more than $60,000 — from 10 years ago. Just one year of spending on a child can cost up to $13,830 in 2010, compared to $9,860 a decade ago.

      “Everything is more expensive and each family makes its own set of trade-offs,” said Ellen Galinsky, president of the Families and Work Institute in New York. “Many parents are working longer hours, or another job, and they are giving up time at home. It’s a complete catch-22.” From buying groceries to paying for gas, every major expense associated with raising a child has climbed significantly over the past decade, said Mark Lino, a senior economist at the USDA. Food prices, in particular, have weighed on parents’ budgets as rising demand for commodities like corn and wheat, along with other factors such as rising oil prices, drought and floods, have made even a box of cereal a pricey proposition. Another notable increase has been the cost of transportation, which soared as a result of rising gas prices. Between 2000 and 2010, consumers paid an average of 85% more per gallon at the pump, according to AAA.

    • Stronger dollar means it costs less to buy goods from other countries.

      If their currency weakens it costs them more to buy U.S. goods.

      I’m sure that those two forces, cheaper alternative supply and lower foreing demand incrementally lower our food prices.

      What am I missing in the article that explains some other factor over and above those ways that should push our US prices down…

      Or, was this Article written in Europe and picked up here by some writer who didn’t understand we’d have the opposite situation they would?

    • The US and Europe are tied together economically. What happens there happens here (to a lesser extent) and visa-versa. So if Europe is the dumps, we follow. But multinational corps try to retain their profits by holding prices steady as long as possible, then by cutting quality or quantity, or both. Hence, the dollar doesn’t go as far.

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