Prometheus 6

You think it's a coincidence that prices increased at a rate far exceeding the inflation rate on exactly those items? You think the "economic growth" Bush claims credit for would look the same if they included food and fuel in their calculations?

Digging deeper into the data reveals, for example, that the price of bread rose 7.4 percent last year, almost twice the rate of inflation.

The price of eggs rose 29.2 percent in 2007, while the price of fresh whole milk was up 13.1 percent. Since July, when milk prices first soared, the price of fresh whole milk has risen by almost 23 percent.

"The kinds of things you purchase every day are going up (in price)," said Gus Faucher, the director of macroeconomics at forecaster Moody's Economy.com in West Chester, Pa. "People who are at the lower end of the income scale are going to feel that more."

New inflation data explain middle-class squeeze
Kevin G. Hall | McClatchy Newspapers
last updated: January 16, 2008 07:34:57 PM

WASHINGTON — New data from the Labor Department confirm what most middle-class Americans already know: Inflation is squeezing them.

As consumer prices rose by 4.1 percent last year, the highest rate since 1990, the prices of basic essentials such as food, gasoline and health insurance climbed far more steeply, explaining why so many Americans are telling pollsters that the economy is their chief concern. 

The Bureau of Labor Statistics reported Wednesday that the price of food and beverages rose 4.8 percent. At the same time, real weekly earnings failed to keep pace, rising 0.9 percent for the year. In the simplest of terms, a dollar earned bought less.

This partly explains why the economy so frustrates Americans.

"From a standpoint of the consumer, they react to (inflation) like a tax increase. They feel less wealthy, they feel pinched and they are looking for institutions or people to blame," said William Beach, an economist and the director of data analysis for the Heritage Foundation, a conservative policy-research organization.

The consumer price index collects price data on just about every imaginable good or service in 87 urban areas around the country. These data are culled, products are assigned numerical weight based on their relative importance to consumer spending, then an average change of prices is determined.

The Labor Department issues monthly reports on consumer inflation based on this data, detailing broad categories of consumer expenditures such as transportation, energy and medical care.

But these categories tell only a partial story of the middle-class squeeze.

Digging deeper into the data reveals, for example, that the price of bread rose 7.4 percent last year, almost twice the rate of inflation.

The price of eggs rose 29.2 percent in 2007, while the price of fresh whole milk was up 13.1 percent. Since July, when milk prices first soared, the price of fresh whole milk has risen by almost 23 percent.

"The kinds of things you purchase every day are going up (in price)," said Gus Faucher, the director of macroeconomics at forecaster Moody's Economy.com in West Chester, Pa. "People who are at the lower end of the income scale are going to feel that more."

It's not just rising food prices that are pinching the budget of working Americans.

The price of health insurance, another major political-campaign theme, rose by 10.1 percent last year. Medical inflation also continued to outpace the broader consumer inflation rate. The price of medical care nationally rose by 5.8 percent in 2007 and the price of medical care services rose by 5.3 percent.