Here comes Inflation?

Wal-Mart CEO Bill Simon expects inflation


U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday.

The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.

Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.

"Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says. "Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."

Consumer prices — or the consumer price index — rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Core inflation, which excludes volatile food and energy costs, rose a more modest 0.2%, though that still exceeded estimates.

Comment: Wouldn't surprise me. You see it in gasoline, smaller packaging for food, etc


  1. Milk prices up 10% in the past couple of months......they're usually quite stable, and I seem to remember paying about $2.50 per gallon just a few years ago.....it's like you get inflation when the Fed pumps the economy full of cheap money or something like that.

  2. More on:

    Dos Hombres: Wal-Mart, Corporate M&A and What Really Matters:

    The government doesn't spend every day buying merchandise that they then sell to consumers. Wal-Mart engages in that activity to the tune of $1.5 BILLION a day.

    It's worth noting that an ongoing criticism of Wal-Mart is that the company is using its massive scale to grind down its suppliers. There isn't a company on earth more adept at getting lower costs of goods. Forget what the government says about CPI and PPI and pay only passing attention to prices at the pump. Wal-Mart is telling us prices for consumers are going higher. QED: prices the American consumer pays for everything are going higher.

  3. Inflation Getting Stronger than a 'Whiff':

    Moody's Economy.com economist Mark Zandi said the idea that inflation is picking up may be actually more of a reality than economists are currently forecasting. He said he attended a meeting with consumer products companies officials this week, and he heard plenty.

    "They were all on the verge of jacking up their prices," he said. Price increases are not always seen as bad though. When companies have pricing power, it often means there is some traction in the economy, but it's a fine balance.

    The threat of inflation is even more worrisome now that oil has crossed above $105 per barrel and looks set to stay high due to unrest in the Middle East. Some commodities have also seen shortages for other reasons and that has combined to drive prices. For instance, cocoa, trading lower Thursday, has been driven higher by civil war in Ivory Coast.

    "You would expect some kind of pass through, with the surge in commodities prices. It's not unusual, at least not yet. The key is if this becomes self-reinforcing and drives inflation expectations and wage demands," Zandi said.


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