Get ready to pay more at the grocery storeOctober 21st, 2010 at 12:48 pm by Ted Nesi under News and Politics
The other night I complained that David Cicilline and John Loughlin were pandering to elderly voters by supporting increases in Social Security benefits even though the government’s measure of the cost of living has not risen since the last increase in 2009.
As The Associated Press explained on Friday, the reason there was no automatic increase this year and won’t be one next year is because high energy prices in 2008 led to a huge 5.8% increase in Social Security benefits at the start of 2009 – even though gas prices had long since fallen from the prior summer’s $4-a-gallon record highs:
“They received a nearly 6 percent COLA [cost-of-living adjustment] for inflation that no longer really existed,” said Andrew Biggs, a former deputy commissioner at the Social Security Administration and now a resident scholar at the American Enterprise Institute.
“Seniors aren’t being treated unfairly, here,” Biggs said. “It looks bad, but they’re actually not being treated unfairly.”
By law, the next increase won’t come until consumer prices rise above the level measured in 2008. The trustees who oversee Social Security project that will happen next year, resulting in an estimated 1.2 percent COLA for 2012.
Still, the average person’s perception of inflation is often very different from what official data shows. And either way, a report in today’s Wall Street Journal warns that the rising cost of commodities like grain, cheese, meat and oil mean we may see prices rising at the supermarket in the coming months:
Corn is up 44%, milk is up 6.5%, hot rolled coil steel is up 4%, copper up 29%, and oil up 14% from a year ago. At this point it’s difficult to quantify how broadly these price increases will affect future earnings. The big unknown is not only how much further commodity prices will rise, but how much of that added cost companies will be able to pass along in the form of higher prices. …
Grocery stores have struggled with price deflation in the last few years and had welcomed signs of food inflation as a means of raising profits by passing along the higher prices to consumers. But with intense competition for customers resulting in fierce discounting battles among stores, inflation isn’t as welcome now.
The big chain stores see their costs either already rising or expect them to, and they’re growing nervous about the prospect of passing those higher costs on to price-conscious consumers.
Case in point: [Shaw's Supermarkets parent company] Supervalu Inc. lowered its fiscal 2011 earnings outlook on Tuesday saying it plans to continue cutting the prices it charges for products, even as the prices it is paying for them are rising. Chief Executive Craig Herkert said he received notice by a “major supplier” the day before that “significant increases across the board” were coming.