Report Shows Prices Rising At Wal-Mart

Federal Reserve Chairman Ben Bernanke launched his Quantitative Easing 2 policy because he sees very little inflation in the economy. But Wal-Mart shoppers are apparently seeing a bit more than the Fed chairman.

In a note last week, retail analyst Patrick McKeever of MKM Partners, identified what he calls a "small, but meaningful increase" in the price of 86 Wal-Mart items he tracks on a regulator basis. The average price is up 0.6 percent in the last two months. On an annual rate, that's about a four percent inflation rate.

Officially, the inflation rate is much lower, in part because home values are still going down. Falling real estate prices remain a strong drag on the economy. With high unemployment, there is also less demand for goods and services, causing Fed policymakers to fear prices could actually start moving backward.

The idea behind "Quantitative Easing," in which the Fed plans to purchase an additional $600 billion in Treasury bonds, is to pump more money into the economy, which normally has the effect of raising prices.

Rising prices

The problem for consumers, however, is that some prices have already started going up. Over the summer corn prices skyrocketed because of drought conditions, leading to an increase in many food item prices.

Then there's energy costs. Demand for gasoline remains low due to a sluggish economy and the end of the summer driving season, but gasoline prices have surged in the week's since Bernanke announced his new monetary policy. Oil, of course, is priced in dollars, and pumping more dollars into the money supply has caused the greenback to lose value on trading markets.

And that brings us back to Wal-Mart. Wal-Mart imports many of its products, which will be more expensive when purchased with less-valuable dollars. Economist Joel Naroff already sees signs of that.

"Import prices soared in October as food, fuel, industrial supplies and vehicle costs jumped," Naroff said. 

 So, while home prices may be going down, other costs of things that consumers buy every day are going up. In an interview with Investors Business Daily, Bruce McCain, chief investment strategist at Key Corp.'s Private Bank, said he foresees higher prices for consumers. Businesses, he says, have held off as long as they can.

"Clearly you've got some major risk that businesses finally capitulate to the cost increases they're seeing and pass them along," he said.

The Labor Department will issue its official inflation report later this week.