Sign of the times: $.99 says they can't sell for under a buck!

While Larry Kudlow and the rest of the neo-con Kudlowites are telling you the economy is Goldilocks, reality is trying to remind us that things aren't so golden.

Sure oil is now almost at under $100, and that gas in some places now cost less than a discounted haircut.  The grain complex has come off its seasonal highs, with the talk of a "crash." Hell, even the price of homes has come down to the point where folks are beginning to say the end of this deflation could end soon!

Yet, in light of all this, the general consensus is that prices in general are still on the upside.  Costs across the board are still going up.  And today, one of the hallmarks of cheap goods is now saying they can't even live up to their name's sake!

"Just as Motel 6 was eventually forced to raise its price above $6, after 26 years, we are forced to raise our price by just about one cent," Schiffer told reporters at a press conference inside the company's top-volume store, located a few blocks from Beverly Hills.

Schiffer said this is the first time the chain has implemented a pricing change since it was founded in 1982. The company has 277 stores in California, Texas, Arizona and Nevada.

"If inflation continues as it has and commodity prices keep going up, we may be forced to go higher," Schiffer told CNBC. "Right now we hopefully will see some stabilization on fuel prices. Gasoline has been down over the last couple of days. But we do believe this gives us plenty of breathing room. But if we were forced to go higher in the future we could could it."

- excerpt from "Discounters Gloom: 99 Cents Only Stores Add A Couple Nines", CNBC, 2008.

The previously reported Consumer Price Index still showed prices heading north. While not as high as the previous month's reading, it was still above consensus estimates.  Excluding food and energy, instead of the .8 growth, CPI would have been at .3 growth which was the same as the previous month.  So this tells us that food and energy were the biggest motivators.

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Above was a chart of the latest CPI figures.  Below is a chart of percentage changes in hourly wages.

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(data from the Bureau of Labor Statistics, chart by Freelunch.com)

One can see how the average consumer is falling behind.  If one accepts the official government-stated rate of growth for inflation of 4%, then one can see the problem.  If inflation is at around 5.5% with a growth rate of 4% a year, wages need to exceed at the very least that rate of growth.  Yet, the BLS's numbers show wages continuing a down trend starting from the mid-1970s.  The latest figures show a rate of growth for wages at 4.08% (actually the previous quarter averaged around 3.5%!).  Thus a gap exists not only at how much prices are increasing, but also at rates of growth in that inflation in reference to wages.  Gets kinda confusing, I know, but not hard to realize we're getting burned.  By rates of growth alone, we have half a percent as a gap and between the official rate of inflation and wages at least 1.5%!!!

Now to many, that may not seem like much, but these rates only highlight a small picture.  In reality, the price of food and other goods has gone up much higher.  Indeed, the only place we really ever see deflation in any former on a longer-term basis, in regards to consumer goods, is electronics.  But folks don't buy iPods and computers every week, they purchase bread, veggies and other things.  Last month McDonald's, after facing a near rebellion by it's franchises, allowed for it's Dollar Value meal to be altered.

But folks don't do their week's worth of food shopping at McDonalds (well sane people don't).  They go into their local Jewel's (SuperValu, formally Albertsons) or Dominick's (Safeway) and see first hand.  In a way, you could say that the average mom trying to buy food to put on the table could be labeled a first-responder in the inflation war.  Moms, ya gotta love 'em!  Well, it seems we're losing on the 99 cent front.

<sup>Cross posted on
The Economic Populist
-
A Community Site for Economics Freaks and Geeks
</sup>

Tags: 99 cent stores, commodities, Economy, food, inflation (all tags)

Comments

1 Comment

fighting inflation tips jar

Thank you for reading my latest piece. Man oh man, it seems we just can't get ahead, these days!  Here's to hoping help comes along soon!

by johnny venom 2008-09-09 10:16AM | 0 recs

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