July 23rd, 2007, filed by Brad Dorfman
Where are U.S. consumers seeing prices rise the most? How about at the local grocer?
Grocery store prices are up at an 8 percent annual rate this year, the fastest pace since March 1990, David Rosenberg, North American Economist for Merrill Lynch said, citing the June consumer price index report.
Grocers have been under pressure to keep prices in check for years amid fierce competition from Wal-Mart Stores, the retailing behemoth that made its bones with everyday low pricing and has become the largest U.S. grocery retailer.
But in recent quarters, food manufacturers have been able to push higher prices through grocers to help make up for rising costs for everything from corn to milk to fuel, putting grocery stores atop the sectors showing the most pricing power.
Among other retail and food sectors noted by Rosenberg, jewelry store prices are up 6 percent, and restaurants were up 3.5 percent.
On the downside, clothing prices have declined four months in a row, and are down 1.4 percent year on year, the worst deflation in 16 months. Women’s clothing prices are falling faster than men’s.
Toy store pricing, meanwhile, is down eight months in a row and the year-on-year pace is down 4.3 percent, he said.
For the equity market, “this is key since determining which sectors to be in and out of hinges, at least in part, on whether or not firms are able to raise prices and to make them stick,” Rosenberg said.
Rising food and energy costs have been the primary culprits behind stubbornly high U.S. inflation in recent months. The interest rate-setting Federal Reserve has said that inflation remains its primary concern — trumping even the slowing housing market.
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