10 Things You'll Be Paying More for This Year
Mar 19th 2011 10:00AM
Updated Mar 19th 2011 9:12AM
One step forward, one step back. That's the story of the American consumer as the U.S. economy digs itself out of its most recent recession.
Economic analysts who feared that an improving economy and aggressive monetary policy would likely lead to inflation may be proven right. With costs of commodities such as oil and wheat jumping in recent months, many consumer-goods suppliers, food-service companies and other entities are saying price hikes will be necessary to offset the increased costs of raw materials.
And this week, the U.S. Labor Department said February consumer prices increased 2.1% from a year earlier, the largest such jump since April 2010.
Such inflation takes the buzz out of an improving job market that was expected to help out the average family. Earlier this month, the U.S. Labor Department said the economy added 192,000 jobs in February, while the nation's unemployment rate was 8.9%, down slightly from 9.0% in January and down from 9.7% in February 2010.
So now that the typical family will have a few extra dollars to spend, here are 10 products that are going to eat up more of that cash:
"Nathan needs some Huggies," the Nicolas Cage character says in the 1987 Coen Brothers' classic Raising Arizona as he prepares to hold up a convenience store. This year, more of us may be inclined to do the same once diaper maker Kimberly-Clark (KMB) works in its price hikes.
The Dallas-based company said this week that it needs to offset the cost increases of raw materials such as wood pulp and oil by boosting prices on many of its consumer goods. That means the price of products such as Huggies diapers and baby wipes is going up about 5%.
So if you're thinking about toilet-training your kid, now may be a good time.
When your signature sandwich consists of "two all beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun," you're looking at a lot of different commodities that are being subject to price spikes.
And the world's largest restaurant chain can only hold off for so long.
That's why McDonald's (MCD) said in January that it would boost prices on some of its menu items to cover ingredient costs that in some cases will rise as much as 2.5% this year.
The company, which had held off on price hikes for fear of alienating potential customers who were already being hit by rising grocery-store prices, didn't specify which items would get the menu adjustment, but don't be surprised if you have to shell out a little more change for that double-decker burger.
Whether the truck picking up your package is red, white, blue or brown, it's costing you a little more to ship that precious cargo than it did last year.
FedEx (FDX) said last fall that it would boost shipping rates for domestic and export services by about 4% in order for world's biggest air-cargo carrier to offset the effect of rising fuel costs.
Not wanting to pass up a chance to one-up its competitor, UPS (UPS) followed suit by announcing ground-package rates that would be about 5% higher in 2011.
And with fuel prices continuing to rise and business spending rebounding -- UCLA's Anderson Forecast estimates first-quarter year-over-year gross domestic product growth at 3.8%, the second highest figure in five years -- don't be surprised if UPS and FedEx work in another price hike by the end of the year.
Fresh Breath and Soft Hands
One may not associate minty fresh breath and the lemony scent of dish soap with the black smoke being belched out of the back of a semi-truck, but when it comes to pricing, there's a direct connection. The cost of shipping consumer-goods products to thousands of retailers across the country increases with the price of fuel.
Colgate-Palmolive (CL) said as much in January, indicating that consumers should expect prices of products such as Colgate toothpaste and Palmolive dish soap to rise as much as 2% this year.
With the price of regular gas up more than 25% from a year ago, demand for Japanese-made hybrid vehicles like the Toyota Prius and fuel-efficient four-cylinder cars such as the Honda Fit was already set to rise. This would force dealers to hold their prices ever closer to the MSRP and limit their discounts.
The only thing that could further steepen such likely price increases was a supply shock -- and, unfortunately, that's what's occurring in the aftermath of the magnitude 9 earthquake and resulting tsunami that struck Japan on March 11.
While the scale of the effect on Japanese auto deliveries remains to be seen, U.S. dealers are likely to push up pricing until production issues are sorted out.
Falling home prices would seem to indicate that more people would jump into the housing market, but that doesn't appear to be the case.
After a brief reprieve last year, new home prices are set to fall again in 2011 and reach their lowest averages since 2003 as interest rates start creeping back up and banks continue to take a more cautious lending approach to prospective buyers, UCLA's Anderson Forecast says.
Meanwhile, apartment rents may rise as much as 3% this year on the combination of an improving job market and the slowdown in multi-unit housing construction during the past few years.
The jump in tuition for publicly funded colleges and universities over the past few years has been well-documented, with the average public school fees doubling over the past decade to more than $7,000 as cash-strapped states pulled funding. Given that even the most robust state economies such as Texas are facing deficits, tuition hikes are likely to continue.
Count aluminum and copper among commodities whose prices are expected to advance this year as the economy recovers. That means higher prices for Procter & Gamble's (PG) Duracell and Energizer Holdings (ENR) batteries, and both companies have already indicated this year that price hikes would be in store.
No matter how the labor issues between the National Football League's players and owners are resolved, owners will be sure to publicize the financial sacrifices they made to prevent professional football's first work stoppage since 1987.
Then they will raise ticket prices. And with pro football's popularity never bigger -- Super Bowl XLV was the most watched television program in history -- the fans will pay them.
Again, fuel costs are a primary culprit, but so is a rebound in both business and leisure travel that began midway through 2010, allowing even the low-cost carriers to start hiking fares. Also, more airlines are unbundling services that had previously been included in the ticket price -- think meals, blankets and seating in certain parts of the cabins. A ticket price that may seem the same may now include less as far as services go.
And while you're away on holiday or for business, expect car rental prices to rise as well, as companies have been de-fleeting and closing unprofitable outlets for the past couple of years, constraining supply in the process.