Higher and Higher: Walmart CEO Predicts Inflation on Consumer Basics
Prices are moving up on things like food and clothing. We've reported on commodity prices rising in the past. Cotton, for example, is expected to increase close to 30% in the first half of this year, and most of us have felt the pinch at the gas pump. Prices in Chicago, where I live, are hovering around $4 a gallon for regular gasoline; that's nearly $1 more than this time last year.But beyond gas, consumers have largely been shielded from price increases at retail. That is because large chains like Walmart and Target have a lot of power when it comes to negotiating costs with suppliers, putting pressure on manufacturers to cut costs elsewhere and keep the price of goods down. When that option runs dry -- there are only so many things a company can do to reduce operational expenses -- many retailers absorb the cost rather than pass the increase along to customers.
That's about to change, cautions Simon.
The consumer price index rose 0.5% in February on a seasonally-adjusted basis, according to the U.S. Bureau of Labor Statistics. Over the last 12 months, all items indexed increased 2.1% before seasonal adjustment. Most disconcerting, food indexes rose in February, with sharp increases for fresh vegetables and meats. Staples like milk and other dairy items are at their highest since 2008.
So far apparel hasn't been too affected, but those rising gas prices will take a toll in this category too. It simply costs more to make and transport goods than before, and that's on top of higher commodity prices.
If Walmart can't keep prices down -- and the retailer has actually been credited with keeping inflation at bay during much of the recession, and before -- then U.S. consumers will actually start feeling the pinch. Simon says the retailer will have to start passing higher costs on to shoppers, having exhausted all other avenues.
His warning shouldn't incite panic, but will hopefully assist consumers when budgeting and shopping right now. Have you noticed prices going up at the grocery store?