Consumers are keenly aware of the rising prices. In a survey of investors in November, the UBS/Gallup poll found that 74 percent say inflation is hurting the economy, up from 64 percent a year earlier. Over a third said inflation was "hurting a lot," the highest reading since the poll started asking this question three years ago.
"What is happening is that consumers are upset about prices," says Dennis Jacobe, chief economist for Gallup in Washington. Economists thought the surge in energy and food costs was contained, he says. But now, he wonders if the data indicates that business feels it has to adjust its pricing.
That's the case, for example, at Studio 24E, a boutique in Oakland, Md. Within the last two months, Greg Elliott, the owner, has had to start to raise prices by about 5 to 10 percent. "We tried to eat our increased costs, because what we do is customer service," says Mr. Elliott. "But now, even for jewelry that's getting repaired, that's very hard to do."
If you want to buy Hannah Montana bedsheets, backpacks, dolls, or handbags at Ty's Toy Box, they will cost about 25 percent more than they did a month ago. While part of the rise reflects a surge in demand for Disney's singing phenom, part of it stems from increasing cost pressures at Ty's, based in Erlanger, Ky. "Prices are up on our inbound shipping," says Ty Simpson, the CEO of the online retailer.
Mr. Simpson says he's actually losing money on some items because of increases in shipping costs. He says shippers have moved from charging by weight to charging by dimensional weight. So a large item like the Thomas the Tank Engine Track Rider, a toy train that children can ride, is now a money loser, despite a price tag of $249.99. The company has started charging more for the heavier items it ships.
In Elliott's case, it's not just increased shipping expenses. Gold is up about $200 a troy ounce so far this year. Stainless steel, popular with many consumers, has doubled in price. "We can only [absorb] so much of it; we've had to raise prices," he explains.