Consumers are paying more for a range of products, including bacon, blouses and used Buicks, as the economy rebounds strongly from the covid-led recession with considerable help from Congress and the Federal Reserve.
The overarching question is whether these price increases will stick -- and for how long. Fed officials have so far maintained that the increases will dissipate fairly quickly, though some economists warn the trend could be more lasting.
Costs of raw materials, such as lumber, paper, steel, glass and plastic, as well as manufacturing and shipping, are rising in line with rebounding demand. A widespread microchip shortage is adding to retailers' struggles by making it harder to automate supply chains and keep operations running smoothly, said Greg Portell, a partner in the consumer practice at consulting firm Kearney.
"You have inflationary pressures from two sides: The cost of materials is going up at the same time that demand is rising," he said. "Typically you have one or the other, but now you have both, which is creating the crunch."
The recent run-up comes after years of lagging inflation. While product prices can fluctuate, policymakers generally aim to keep annual inflation running at about 2%.
Generally, Portell said, he expects prices to stabilize in 18 to 24 months, as suppliers and manufacturers catch up to pent-up demand for consumer goods. In the meantime, here are some of the categories where prices are climbing:
• Used cars and trucks: Cars are in high demand but short supply -- and that, economists say, is particularly true of the country's stash of used vehicles. Early in the pandemic, Americans wary of public transportation snapped up used cars to help with commutes and errands. Since then, demand has continued to climb beyond supply, due in part to a microchip shortage and factory shutdowns that have slowed production of new vehicles. Used car prices rose 7.3% last month.
• Furniture: Rising prices for materials such as leather, steel, acrylic and lumber have driven up prices for desks, sofas and other high-demand furniture. Manufacturing and shipping have gotten more expensive too, as companies deal with overwhelmed factories and clogged ports. Retailers say just about every step of the supply chain has become costlier and more cumbersome in recent months, leading to steadily climbing prices. Ocean freight shipping fees from Asia to the United States have quadrupled in some cases, from about $1,500 per container to $6,000 in the past year, said Mark Yeager, chief executive of Redwood Logistics.
• Gas: The average price for a gallon of gas has risen nearly 50% in the past year to more than $3, according to AAA. Analysts say tanker shortages and the recent cyberattack on Colonial Pipeline have contributed to an increase in crude oil prices. But demand is also up, with Americans hitting the road for summer travel. Analysts say recent stimulus checks have also contributed to rising consumption.
• Beef and pork: Bacon, steaks and other types of meat products are getting pricier as the industry grapples with labor shortages, as well as rising grain and energy costs. Costco says it's paying as much as 20% more for beef than it did a year ago, due in part to rising feed and transportation costs. Demand is soaring too, as restaurants reopen and countries such as China and Vietnam clamor for American pork and beef exports. Adding to the challenge, industry experts say, is a slowdown in processing times. Meat processing plants have been particularly hard-hit by covid-19 outbreaks that have hindered operations.
• Washing machines and dryers: A semiconductor shortage, combined with surging prices for steel and plastic, is driving up the cost of washing machines and dryers. Whirlpool recently raised prices by as much as 12%, with executives saying that rising material prices have already cost the company $1 billion.
• Airfare: After a year of rock-bottom rates, plane tickets are getting costlier just in time for summer travel. Many airlines, which dramatically cut flight schedules during the pandemic, are reporting a surge in bookings as newly vaccinated Americans make up for lost time. The result, economists say, is a classic case of low supply and high demand. And airlines are more than eager to make up for the billions in losses they've reported over the past year. Fares are already creeping up to -- and sometimes beyond -- pre-pandemic levels. Average ticket prices for domestic travel have risen 7% since May, while international fares are up 13%, according to financial research firm Bernstein.
• Clothes: Apparel retailers slashed inventory early in the pandemic when it was unclear when -- or what -- consumers would be ready to buy again. But now that shoppers are snapping up shirts, dresses and suits again, stores are finding that they're not having to offer the steep discounts they once did. National chains are scaling back on promotions, in part to make up for rising manufacturing and transportation costs. Analysts say a more complex supply chain -- due in part to a scramble to diversify operations to dodge tariffs -- have also added to costs.