GOV'T: Prices surge higher

By CHRIS BAGLEY - Staff Writer | Wednesday, April 16, 2008 8:47 PM PDT ∞

Consumers in North County and across the nation are paying rising prices for a range of items, and particularly for food and fuel, the U.S. Labor Department reported Wednesday morning.

The agency's Consumer Price Index rose 0.3 percent in March, as economists had expected. The index remained unchanged in February, but has risen 4 percent in the last 12 months, slightly faster than wages.

Gasoline and other energy costs continued to be the prime culprit, rising 17 percent over the year. Prices at restaurants and supermarkets rose an average 4.4 percent. Economists have blamed rising fuel costs on the eroding value of the U.S. dollar. Rising fuel costs can translate into higher prices most often for heavy and bulky items that must be transported long distances.

Gas prices in North County have risen by 15 percent in the last year. Diesel, which powers most delivery trucks, has risen by 37 percent, and several North County businesses that have had to pay larger fuel surcharges have begun passing the increase along to consumers.

The price of bread on stores' shelves has risen nearly 15 percent nationally. Milk prices have risen 13 percent and egg prices have risen by more than 20 percent.

Escondido residents Scott and Heather Wood still treat themselves to lunch occasionally, they said, standing in front of the Old Town Buffet on Valley Parkway Wednesday afternoon. But higher grocery prices have prompted them to save money by shopping less often at supermarkets and more often at a Costco wholesale club.

Heather Wood, who grew up on a farm in southwestern Minnesota, said she has seen both sides of the food-price roller coaster. She remembers the 1980s, when low crop prices had her father and others scraping along the edge of bankruptcy. Various governmental requirements for gasoline content have been cited as a key reason for increases in the price of corn, which can be refined into ethanol, and in the prices of other crops, which have been cleared to make way for more corn.

"The cost of fertilizer and everything has gone up," Heather Wood said.

Average wages, by comparison, have risen only modestly over the last year, by just 3.6 percent on a weekly basis, the Labor Department reported earlier this month. San Diego County workers' wages have risen somewhat more quickly in recent years, but so have the prices they're paying, according to the federal agency. Rapid appreciation of homes ---- combined with aggressive use of cash-out refinancings ---- kept the region's economy chugging along healthily into 2007, but that has made the downturn since then all the more painful, economists have said.

The Labor Department reported that "real" ---- inflation-adjusted ---- average weekly earnings for nonsupervisory workers dropped by 1 percent last month nationally, the sixth straight month that inflation-adjusted wages have fallen.

Valley Center resident Jarrett Trevino, who was shopping at the Target department store down the road, said he understands that prices have always risen over time, but he's seen a particular squeeze in the last couple of years. That has caused him to delay a recent vacation, he said.

"Things go up, but everything's so rapid," he said.

The inflation pressures are occurring just as the economy seems to be sinking into a recession, with consumers cutting back on spending and the housing industry, where the biggest troubles started, sinking further.

"Nothing is going right at the moment," said Mark Zandi, chief economist at Moody's Economy.com. "That is why consumer confidence has fallen to the lowest point since the early 1980s."

With crude oil prices briefly touching a new record near $115 per barrel this week, and food prices remaining under pressure because of global shortages, analysts predicted consumers will feel more inflation pressures in the months ahead.

Gasoline pump prices hit a new nationwide record of $3.40 per gallon on Wednesday, up 53 cents from a year ago, according to the Oil Price Information Service and AAA, and many economists believe that price will hit $4 per gallon by Memorial Day.

Zandi said the rise in food and fuel prices has been a significant drain on consumers' purchasing power, another reason he and other analysts believe the country has fallen into a recession. Consumer spending accounts for two-thirds of economic activity.

While the Bush administration is hoping that economic stimulus checks being mailed to households starting next month will make any slump short and mild, Zandi said the $100 billion in payments consumers will get this year will be just enough to offset their higher gasoline bills, leaving nothing left to boost consumer spending in other areas.

The Associated Press contributed to this article. Contact staff writer Chris Bagley at (760) 740-5444 or cbagley@nctimes.com.

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