Higher Prices Ahead This Holiday Season
Ten percent of Americans say they will increase their holiday spending this year. This could translate to an increase of $16 billion, or about $150 per household.
CBS News correspondent Bill Whitaker reports every hour clothing manufacturer Brian Weitman does something he almost never did before. He checks cotton prices. Cotton, which stayed at a steady price for years, now is on a tear, up 100 percent in little more than a year.
"Cotton prices are out of control right now," he said.
High Prices Means Holiday Shopping May Suffer
Weitman makes pockets for high-end jeans. A year ago a roll of cotton cost him about $230. Now it's $350, $120 more per roll. It's hitting him in his pocket.
For a while, Weitman said he'd been eating the loss. "But it's gotten to the point where people have to start raising prices and it's affecting everybody," he said.
It's not just cotton. While overall inflation has been flat in this recession, commodities - things we grow to wear and eat - are climbing high with no end in sight.
Coffee beans jumped 60 percent in the past year. Starbucks, which already had raised the price of some fancy coffees as much as $.30, announced it's raising prices again.
What else is popping up? Corn is up 39 percent. Wheat: 33 percent. Soybeans: 26 percent. Sugar: 23 percent. They all cost more, forcing food giants General Mills, Kellogg and Kraft to boost prices.
In fact, almost everything in your grocery cart is up this year: eggs up by 11 percent; bread, meat, poultry, milk are all up. Butter jumped 19 percent since September. Add up just these staples and you're paying $1.59 more than a year ago and they're likely to keep climbing.
"The last few months we have seen a lot of the costs that go into food production rise pretty dramatically and so our forecast for 2011 is for higher prices," said USDA Economic Research Service economist Ephraim Liebtag.
Blame supply. With about one out of every five bushels of corn going to make ethanol there's less for food and feed. Floods in Pakistan washed out cotton fields. And, blame demand. Increasingly rich Chinese and Indians are buying more of everything. The ripple effect is that there's less of everything, so Americans should expect to pay more, especially for food and fashion.
"I don't see things going the other way any time soon," said Weitman.
Giving retailers another worry is shoppers, still spooked by the recession, now will be scared off by higher prices.
