Seven Things That Will Cost More in 2011

by Robert Wenzel

Economic Policy Journal

This is serious. The very mainstream AOL is warning about price inflation.


I guarantee you that no one at AOL is anxiously waiting for the Fed money supply numbers that are issued in the Fed's H.6 release every Thursday afternoon. They are writing about price inflation because they feel it, and they think they can write about it without getting flack from their readers.

If AOL writers are noticing price inflation, it is a very ominous sign that price inflation is about to kick to the next level, where consumers start acting like prices will be higher in the future and thus cause an acceleration in the price inflation process by deciding to hold smaller cash balances.

Here are the seven inflation points AOL is warning about:

1. A Trip to the Grocery Store

The USDA forecasts a 2% to 3% hike in the cost of all foods in 2011...Expect a big spike in the dairy case and meat counter, where pork alone is forecast to rise between 3% and 4%.

Keep in mind this is AOL so they are buying into the USDA forecast of overall 2% to 3% food price increases. By the end of 2011, it's likely to be more like 10%

2. The Cost of Gas and Heating Fuel

Some fast-and-loose talk by former Shell Oil President John Hofmeister says gas will be back to $5 a gallon this year. That's about $2 more per gallon than the current average price of $3.05, says the Department of Energy.

I'm impressed with this call. AOL discussing a near doubling in the price of gasoline. Inflation at the pump. People are starting to feel it and suspect more is on the way.

3. Health Insurance and Medical Costs

Blue Shield in California said it was going to raise premiums by almost 60% and you can bet that your insurer has something similar planned.

Don't look for much help from the government here. The Obama administration wants individual and small-group insurers to justify when they raise rates by 10% or more. But it's a toothless gesture.

Consumers know that ObamaCare is not going to cut health expenses.

4. The Cost of Clothing

Cotton prices are on the upswing and you're going to feel it in the stitched pocket. Cotton is now 80% more expensive than it was at the start of 2010 and many manufacturers believe they have no choice but to pass it on to you.

I don't think consumers are on to the coming boost in clothing prices, yet. AOL is really giving its readers a heads up on this one.

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