After trying to keep retail prices flat through the recession, many companies will be raising their prices from 15% to 20% by this fall, according to a recent article in the New York Times.

Copper recently hit its highest level in 40 years and steel has been continually reaching staggering prices. Cotton prices are almost at their highest levels in over a decade and prices for corn, sugar, wheat, beef, pork, and coffee are quickly rising.

Labor is becoming more expensive in low-cost countries like China and the awful environmental crisis in Japan will certainly increase prices on many electronic items throughout the world.

Many big companies, including Kraft, Polo Ralph Lauren and Hanes, say they cannot hold off any longer and must raise prices to protect some profits.

The cost of raw materials accounts for a just small portion of the cost of most consumer goods, whereas labor, processing and packaging tend to make up a larger share of the prices at the cash register. Foods like coffee, meat and milk, which are closer to raw materials, will probably show some of the biggest price jumps.

Meat prices have surged because of the cost of feed, a decision by farmers to raise fewer cattle and pigs, and strong demand worldwide as living standards rise. An epidemic of foot-and-mouth disease (YUM!) that devastated South Korean hog farms has led to a recent surge in orders for American pork.

For consumers, higher prices in stores means there will be a little less extra cash to spend. For companies, profits may be squeezed, making them a little less likely to invest in equipment or to hire more.

By the end of the year we should know what the impact of these price increases will have on the U.S. and the World economies.

Companies that try to pass on all their costs could be met with some resistance. Although consumer spending has risen, unemployment remains at 9 percent, and average hourly earnings are up less than 2 percent over the last year.

With the cost of gas already being above $3.50 a gallon (and it’s not even summer yet), I feel like I’m already dealing with higher prices.
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Nick Haneiko

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