Strategy

Prices Start to Creep Up

Possible pockets of inflation include the airline, food, and transportation industries.
Stephen TaubJune 24, 2004

Economists looking back on this period might well end up saying that this is the point at which a surge of inflation started.

Indeed, citing a need to pass on price increases in energy and other raw materials, a growing number of companies have begun to raise prices. Such hikes help explain why the Federal Reserve will probably hike interest rates next week and why, on Wednesday, a U.S. Treasury offering was priced at its highest yield in two years.

Among the industries that could be on the verge of an inflationary spiral is air travel. The International Air Transport Association, for example, recently recommended a 3 percent price increase for intercontinental flights from Europe and 5 percent from other regions, according to a published account of the association’s recent meeting in Singapore. Only stiff competition is keeping the companies from enacting those hikes, given the high cost of fuel.

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Many other companies, however, are passing along their higher costs. The latest is General Mills, which announce that it is raising prices on such products as soups, frozen breakfast foods, and yogurt, according to the Associated Press. The packaged foods giant cited more expensive energy and ingredients.

Other major food companies, including Hormel Foods, have recent increased price. Hormel announced price on Spam, Dinty Moore stew, and Chi-Chi’s salsa by at least 4.5 percent because of increased costs, USA Today reported last month. “This is the first price increase we’ve taken since 2000,” spokeswoman Julie Craven told the paper.

Birds Eye Foods said it would raise prices at least 5 percent this month. That’s partly because the company paying more for shipping and for plastic bags, which are made from petroleum products, the paper reported.

Elsewhere, Bridgestone Corp. was planning to hike its tire prices 5 percent this month because of higher prices for petroleum, an ingredient of tires and a part of the cost of shipping them. “The last thing anyone wants to do is raise prices,” spokesman Dan MacDonald told USA Today. “But in the face of rising costs, there’s just no other alternative.”

Further, Swift Transportation Co., a Phoenix-based trucker, added a fuel surcharge for customers on the West Coast, according to the paper.