CONSUMER PRICES CONTINUE TO RISE
Cost of food, gasoline, utilities pushing up Bay Area's inflation rate in April to nearly 21-year high
Consumer prices in the Bay Area skyrocketed in April, but fell just shy of the 21-year high they reached earlier this year, a grim new government report revealed Wedneseday.
The Bay Area inflation rate jumped at an annual pace of 5% in April, the U.S. Bureau of Labor Statistics reported Wednesday. The yearly increase in consumer prices last month was only slightly lower than the 5.2% annual rise the government reported for the Bay Area in February, the federal agency reported.
The increases posted so far this year were the highest since mid-2001, according to this news organization's analysis of government reports stretching back to 1990, and shoppers in the already pricey Bay Area are feeling the strain.
Costs for food such as meat, poultry, fish, cereal and dairy products, along with massive increases in gasoline prices and sharp jumps in monthly PG&E utility bills, coalesced to shove the region's annual inflation rate up significantly this year.
“This has been hard on me,” said Elizabeth Leong, a San Jose resident who was getting gasoline on Wednesday in her hometown. “I'm a senior citizen on a fixed income, so the high prices are really affecting me.”
Nationwide, the annual inflation rate reached 8.3% in April, a pace that remained near a 40year high, the government reported. Like the Bay Area, the nation's April figures represented a slight dip in what has otherwise been a torrid run-up in inflation.
Consumers and borrowers now face a double whammy of soaring prices and rising interest rates.
The Federal Reserve last week raised interest rates by a hefty half-percentage point. Frequent interest rate increases loom because the Fed is alarmed that inflation could morph into a runaway spiral.
Officials with the Central Bank are betting that a steady diet of increases in interest rates will help to choke off the surge in consumer prices. But those rate hikes also might throttle economic activity and job growth. Soaring mortgage interest rates have already pushed monthly costs up for homebuyers in recent months, after reaching record lows last year.
“For a while, the prices
were creeping up, but now costs have really gone up,” said Victor Ramirez, a San Jose resident who was shopping at a Safeway in the Bay Area's largest city on Wednesday. “Meat, produce, milk, eggs, gasoline — they're all really expensive.”
One of the major reasons for the difference in the overall inflation rate between the Bay Area at 5% and the United States at 8.3% is that Bay Area consumer prices were already at a very elevated level compared with the rest of the nation prior to the current period of soaring inflation. As a result, the percentage increases in the Bay Area tend to not be as high as the increases nationwide.
Items such as gasoline and housing were already significantly more expensive in the Bay Area than the same categories nationwide, a Bureau of Labor Statistics economist said Wednesday.
Among the key items that contributed to the fast-rising inflation in the Bay Area as of April, measured by the increase in consumer prices for the yearlong period that ended in April:
• Regular unleaded gasoline, up 43.5%.
• Natural gas piped into the home — a component of PG&E's monthly bills — up 23.4%.
• Used vehicles and trucks, up 22.3%.
• Meat, poultry, fish and eggs, up 19.3%.
• Electricity service — another major component of the PG&E monthly bill — up 18.2%.
• Cereal and bakery products, up 15.1%.
• Food consumed at home, up 13.9%.
• Dairy products, up 12%.
• Food, all categories, up 10.2%. Among the items with singledigit increases compared to the same time last year: fruits and vegetables, up 6.8%; food consumed away from home, up 6%; medical care, up 3.2%; apparel, up 3.1%.
Christopher Thornberg, an economist and founding partner with Beacon Economics, warned in a post this week on the company's site that the Federal Reserve's attempts to rein in inflation might not be adequate.
Too much money has been pumped into circulation, according to Thornberg, causing the money supply to balloon. Even worse, he said, the Fed's efforts to increase short-term interest rates won't go far enough and the Fed's other tightening efforts might arrive too late.
The upshot: The nation could be headed for its most dire economic scenario since the 1970s, when a jobs slump and sky-high interest rates menaced the economy simultaneously, a rare but devastating phenomenon called stagflation.
“The U.S. economy is overheating, over-spending, and over-inflating,” Thornberg said. “It's like careening down a hill in a car at 120 miles per hour, headed straight for a parked truck, but worrying about tapping the brakes too hard because you don't want the car to slide.”
Ramirez, at Safeway, said the high prices mean he and his family must slash spending on discretionary items so they can find ways to buy increasingly expensive essential goods and services.
“We just don't treat ourselves as much as we used to,” Ramirez said.
Some consumers like Leong, however, have very little leeway to cut back because of limitations on their income.
“The high prices,” she said, “are going to be a problem for me very shortly.”