Experts' assurances fail to ease inflation pain for consumers
Ken Moritsugu
Knight Ridder Newspapers
Jun. 25, 2004 12:00 AM
HYATTSVILLE, Md. - Max Grace, part-time college student and full-time movie projectionist, can't keep up with inflation.
To cover his rising bills, he spends more time showing movies than hitting the books. His education is delayed. And his grades suffer, said Grace, 24.
"I have to pay a lot more money for everything, from rent to gas to groceries," the University of Maryland student said, packing his groceries into the passenger side of his beat-up 1985 Nissan pickup.
Grace's experience seems to be at odds with government inflation numbers, which indicate that prices remain low by historical standards. Consumer prices are up 3.1 percent over the past year, which means an item that cost $1 a year ago now costs $1.03.
"Our general view is that inflationary pressures are not likely to be a serious concern in the period ahead," Federal Reserve Chairman Alan Greenspan told Congress earlier this month.
"He's obviously not talking about me," Grace said. "He's talking about people who have much more money - at his level, where his words matter."
Grace is right. Greenspan speaks to financial market players, telegraphing Fed plans to raise interest rates slowly because inflation appears to be tame.
What matters to Greenspan, however, is different than what matters to consumers.
A snapshot of inflation shows why. In the past three months, the consumer price index rose at a 5.5 percent annual rate. In May, prices soared at an 8 percent annual clip.
While that rocks consumers, Fed officials are more worried about whether prices will continue to rise that rapidly. And they don't think so. Energy prices are showing signs of easing. And wage increases, which can fuel inflation, remain subdued.
For Grace and other shoppers at a Giant supermarket in suburban Maryland, though, the higher prices hurt.
"It seems to be done a few cents each time so it won't be noticeable," said Rosa Morris, 65, watching her cart as her husband dashed into an afternoon thundershower to retrieve their silver PT Cruiser.
But, she added, "If you shop every day, you notice it. It's a big difference."
Consumers may sense that inflation is higher than the statistics show because the prices of some common items have increased so fast.
The price of milk, for example, rose 14.5 percent last month, and already high gasoline prices climbed an additional 8.1 percent.
Students such as Grace, or their parents, also face rising college costs. In-state tuition at the University of Maryland is due to rise to $6,200 a year this fall, up from $4,800 two years ago, a 29 percent increase.
Other items, though, are cheaper. Prices for used cars, airplane tickets, furniture, phone calls and clothes are down, though some prices have started creeping back up.
Consumers may not notice those changes, because they don't buy those items as often. |
