If Inflation Is So Low Why Are We Paying So Much for Everyday Items?

The economy is said to be growing, more jobs are supposed to be available, and the rate of inflation is as low as it’s ever been. So then why does reality feel like we have to get by on so much less?

How about this? Just because economists claim inflation is under control, that doesn’t mean just about everything we spend money on isn’t more expensive from rent, to food, to energy and gasoline to even our clothing.

A recent report by Jennifer Waters for MarketWatch ) says the costs on a number of everyday items are rising, including:

• A $10 increase in cell-phone bills
• A $1 increase in a fast-food meal
• A 30-cents-a-gallon hike in gasoline.

The Reuters/University of Michigan consumer sentiment index found that consumer confidence is starting to slip again with the index giving back 1.8 points in this month to 72.7. One reason says MarketWatch, is the steady rise in prices for:

• Food prices, which are on the rise no matter where you eat because of a rising cost in commodities pushing prices higher at the grocery store and at restaurants. The latest Consumer Price Index said the cost of food eaten at home rose 1.5 percent last year while food eaten away from home was 1.7 percent higher. MarketWatch says that major food producers like Sara Lee Corp., Kraft Foods, General Mills and ConAgra Foods are dropping discounts and upping food prices by 6 percent to 10 percent at the stores. A restaurant industry magazine, Nation’s Restaurant News, says 60 percent of U.S. restaurant operators said they will raise menu prices this year.
• Energy costs have skyrocketed with oil prices hovering around $90 a barrel pushing up prices at the pump and for home heating oil. AAA says the average for a gallon of regular gasoline is $3.10, some 36 cents higher than a year ago and 12 cents above last month’s average. The CPI’s energy prices overall climbed 7.7 percent last year with a 13.9 percent jump in all types of gasoline and an eye-popping 16.5 percent increase in home heating oil.
• Even though the federal government has extended the Bush tax cuts, some state and local municipalities that have been hard hit by the recession are hiking taxes to make up for huge shortfalls between funding and services. Illinois just passed a 66% hike in personal income taxes raising the state rate to 5 percent of income from three percent. Other states that could impose similar remedies to their fiscal problems are California, New York and Texas. Meanwhile, many cities and municipalities have added penny and dime taxes on everything from bottled water to cigarettes to help fill funding gaps.  
• Prices for airfares are taking off, again. For the third time since mid-December, the U.S.’s largest airlines hiked fares this week. Even Southwest Airlines joined in this time. The most recent hike was to offset an $8 per barrel increase in crude oil.
• We’ve recently reported on fees rising for bank accounts. Banks have retaliated to recent legislative imposed changes to their business models by focusing on new fees for checking accounts, among other services and products. Our story singled out Bank of America, whose products touch one in every two households, reporting that it will raise banking fees and restructure accounts.  But other banks like J.P. Morgan Chase, Citigroup and Wells Fargo are raising fees as well.  
• Even our phone and television viewing bills are going up. AT&T says it’s hiking its rates on home lines in Chicago by as much as 63 percent. Following in the steps of many cable companies, AT&T also is raising its monthly prices on its U-verse TV packages nationwide by 2.4 percent, according to the industry website, Multichannel News. Sprint is adding an extra $10 monthly charge on unlimited data for new smartphone activations or on contracts that are upgrading or adding another smartphone. Sprint says the fees will go into effect at the end of this month.
• The cost of clothing is going up to pay for a rise in the price of raw cotton.
• And finally, apartment dwellers could be facing double-digit rent increases according to The Wall Street Journal due to a shortage of new multifamily units coupled with a rise in prime renter-age households. The Journal says this is giving landlords the kind of leverage they haven't seen since the mid-1990s.