Wall Street is worried about inflation. So are Amy Lopez of Eureka, Calif., Sharon Connlley of Duluth, Minn., and John Henry Armstrong of Denver.
They and other Americans are increasingly feeling the squeeze of higher prices, not only at the gas pump but in the cost of groceries, delivery charges, travel and numerous other items.
“The money you want to save you have to spend now,” said Armstrong, who makes $12.50 an hour as a cook at a Denver hotel.
Armstrong said modest wage growth compounds the problem. His employer used to grant yearly pay raises. About five years ago, that changed, and raises are now given every two years.
“I’ll have to keep pushing as long as I have my health,” said Armstrong, who plans to postpone his retirement.
Inflation remains modest by historical standards, at about 3.5 percent. It appears no threat to return any time soon to the double-digit rates of the late 1970s and early ’80s, perhaps not even to the 5 percent level last seen in the spring of 1991.
But a government report Tuesday showed that prices paid by producers rose 5.6 percent for the previous 12 months, thanks to the relentless rise in energy prices. Economists are forecasting that another report due today will show that consumer prices also are still rising.
While those rates may seem tame, the steady increase has caused so much concern that Federal Reserve Chairman Ben Bernanke is threatening to extend the Fed’s two-year rate- raising campaign, which has sent the stock market plunging for the past month.
Inflation remains “an annoyance” at the moment for most consumers, according to Carl Tannenbaum, chief economist for LaSalle Bank in Chicago.
“Certainly some of these rising prices have hurt people who live on more modest incomes,” he acknowledged. “But in general, these rises in prices have not crippled households at all.”
For Amy and Jacob Lopez, the $70 cost of filling up their Ford minivan has made it tough to get by every month and may force them to sell their auto for a cheaper one.
Amy, a stay-at-home mom, cited the effects of higher prices, especially for rent, utilities and grocery items. Meanwhile, wages for her husband, who works in inventory at a flower-bulb farm, have stayed the same.
U.S. wages have been roughly keeping pace with inflation for the average American, according to Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pa. But the recent trend means they likely won’t in the future, he said.
Lower-paying jobs also are more vulnerable to price rises and perhaps less likely to keep pace.
In Duluth, the 48-year-old Connlley, who makes $9 an hour as a receptionist, is buying more noodles, lower-quality meats and more canned vegetables instead of fresh ones to try to cope.
“In the last couple of years, it’s gotten worse,” she said. “You go to the grocery store now and spend 50 bucks and walk out with a bag, where it used to be enough for two weeks.”
Retirees also can be among the worst hit by inflation since their income tends to be fixed.
“It’s outrageous,” said 83- year-old Bertha Harris of Denver as she shopped for groceries in the Five Points neighborhood.
She said higher prices have made paying her bills more difficult because she depends on Social Security.
“It (inflation) impacts everybody,” she said.
Denver Post staff writer Will Shanley contributed to this report.
Economic snapshot
3.5%
Inflation rate, down from 5 percent as recently as 1991
$1.85 trillion
Market value wiped out worldwide this month because of concerns about inflation and interest rates, according to Bloomberg News
5.6%
Producers’ price increase during the past year
5%
Federal funds rate, a key interest rate the Federal Reserve has increased 16 times in the past two years as a hedge against inflation
