Tuesday June 20, 2006

Inflation hits home for lower-income groups

msnbc.msn.com :

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. Driven by soaring energy prices, inflation is creeping toward 4% for the second quarter and is on pace for the highest annual rate in 15 years. A government report showed that consumer prices have risen at an annual rate of 5.2% so far this year, up from a 3.4% in 2005, thanks to the relentless rise in energy prices. 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, sending the stock market plunging this month.

Many are growing uncomfortable with each tick higher in rates, as balancing checkbooks gets more difficult. "The majority of households are feeling a little uneasy," said Diane Swonk, chief economist at Mesirow Financial, a Chicago-based financial services firm. "... they haven't gotten any pay increases to compensate for the higher gas prices, higher prices elsewhere ... people are feeling like their living standards aren't doing as well." Swonk says the biggest concern for consumers will continue to be oil prices, which ultimately affect the cost of driving to the store to rent DVDs, pizza deliveries and other non-necessities.

While wealthier households may be absorbing the price shocks painlessly, that's hardly the case at the other end of the wage spectrum, where millions of Americans don't need to check stock portfolios to feel the impact. Especially among lower-income workers, inflation is forcing more and more sacrifices, compromises and budget-juggling. Lower-paying jobs also are more vulnerable to price rises and perhaps less likely to keep pace.

(2006-06-20 16:25:59 SGT) [Biz] Permalink

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