With readings on retail sales and the housing market due this week, we'll be focusing on two critically important segments of the economy. Meanwhile, an important holiday approaches for retailers: Easter. Amid hopes that people have emerged from their winter-inspired hibernation across much of the country, we'll see whether they're buying.
At the same time, we'll hear about new-home construction and building plans in March.
Here's what we have on tap this week:
- The Commerce Department reports on March retail sales, Monday at 8:30 a.m. (all times Eastern).
- The Labor Department reports on the March Consumer Price Index, Tuesday at 8:30 a.m.
- The Commerce Department releases March housing starts/building permits, Wednesday at 8:30 a.m.
- The Federal Reserve's Beige Book economic roundup is released, Wednesday at 2 p.m.
Food and gas prices: Why so high?
It's costing more and more to put food on the table and fuel in the tank. Hear whether any relief is on the way.
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From Bankrate.com, This is "Your Money This Week."
We connect the dots between what's happening in the world and your wallet.
I'm Mark Hamrick reporting from Washington.
This week, we focus on two of the areas most Americans must spend money on, whether they like it or not. Food and energy, specifically gasoline prices.
For our first segment, we continue the conversation with Phil Lempert, editor of SupermarketGuru.com. He gives us some terrific tips on how to save on food.
And we chat with Tom Kloza, chief analyst with GasBuddy.
The summer vacation season will be here before you know it. Tom weighs in with his outlook on gasoline prices.
So, put the pedal to the metal and stick around.
All of that and more coming up on "Your Money This Week."
Last time around, Phil Lempert told us about changes in the grocery store business. This week, he's going to provide some practical advice on how to spend wisely. Since we all must eat, why not try to stretch those food dollars?
Food prices have been on the rise this year, in part because of the California drought. To begin, I asked Phil whether he thinks this surge in food prices is going to be a lasting one.
Phil Lempert: The one problem that we have is people don't relate weather conditions to food. They forget that starts in the ground or on trees, and, frankly, the USDA and FDA projections that came out now about two years ago forecast exactly what was going to happen: that prices are going to go up. No one foresaw the California drought, which further exacerbated it. We looked globally to all the weather conditions, all the earthquakes and the tornadoes and the floods -- all of this has a huge effect.
Now, if we just look at California and the drought that is taking place now, about 50 percent of the land is barren, because of lack of water. So we have half the amount of produce that is sold in this country coming from California, and only about half of that is actually planted.
And then you throw on immigration on top of that, and what we find is we do not have a lot of labor in order to pick these fruits and vegetables. So it is going to go up, up, up. There is no question that whether it is produce, whether it is cattle, whether it is chicken -- all of the prices are going to go up.
Mark Hamrick: So Phil, obviously, when we talk about consumers there is no kind of one design or description of consumers that applies to everybody. We still have a lot of people who are struggling coming more than five years after the financial crisis. The unemployment rate is still high by historical standards, and admittedly at the other end of the spectrum there are plenty of people that seem to have a ridiculous amount of money and we are not against that either. But for the people who are really struggling out there, will they stop buying some of these items that become more expensive?
Phil Lempert: Absolutely. We have already seen a decline in consumption of beef, because of the prices. What we are going to see is replacement of different kinds of proteins that people can use.
We know how important protein is, but instead of having beef you might be having eggs as a replacement. So people are going to be smarter, people are going to be looking to save money, people are going to be going through their cupboards before they go shopping to make sure that they are just not buying a duplicate of something that they have there.
More coupons are going to be used, both electronically and paper coupons. And people are going to shop around in different kind of retail environments looking for that best deal.
Mark Hamrick: So if consumers are going to be more price sensitive, because prices have gone higher, and, as we just said, some people are just not in a position to pay. Does that mean that our shopping patterns as to where we shop in the future may change, because we are going to be so price conscious?
Phil Lempert: Absolutely. What we are going to see is we are going to see is more people going to Save-A-Lots, more people going to Aldi. Aldi is on a growth curve and an expansion curve. More people going to Walmart, giving up some of the service and looking for those low prices.
So yes, there is little doubt that as prices go up, people shop in more different locations. And frankly, they are traveling even further to get that best deal.
Mark Hamrick: And what about price discovery? In other words, the easiest way to know what a price is, is to see it in the store. But I am wondering whether with the advent of smartphones and big data, whether people can have better access to prices online somehow?
Phil Lempert: Yes. There are apps out there now that can compare prices, No. 1, from circulars that are out there. No. 2 is, we are actually seeing different websites that can tell you what is on sale. There is a terrific website called ReadySetEat.com, which is a recipe website. But when you go in there and you pick a recipe, you type in your Zip code, choose your supermarket, and it will tell you what are ingredients are on sale for that recipe in your store. So big data is helping us save money as well.
Mark Hamrick: Well, it is fascinating, Phil. This was all fantastic and a lot of terrific information there. I really do appreciate your time, thanks so much.
Phil Lempert, editor of SupermarketGuru.com, wrapping up the second part of our two-part chat. He spoke with us from his office in Santa Monica, Calif.
On the one hand, Americans are being smarter about their use of gasoline. They're buying more fuel-efficient cars. In large cities, you see more people using mass transit, or riding bicycles.
But the price of gasoline is still important. And a big jump or decline in gas prices can have a huge impact on our pocketbooks.
One person who's been watching oil and gasoline prices for years is Tom Kloza. He's chief analyst with GasBuddy, which provides local information on the Web and with its apps on gasoline prices, so you can get the best deal.
Recently, gasoline prices have been little changed, on a national basis, from a year ago.
I asked Tom, as we stare out at the busy summer travel season, where does he think gasoline prices are headed?
Tom Kloza: They are headed higher over the short term, and we will probably see year-on-year increases in most states, whereas for the last four or five months, most people have been paying less than they paid a year ago. It is still fairly cheap compared to what was paid in 2012, but this is, as they say in horseracing, this is the chalk. This is what you can expect in April. April is the cruelest month, and it can deliver some cruel price spikes, although I do not expect this one will be as dramatic as some of the ones in the past.
Mark Hamrick: Now the perception is, is that the US economy will strengthen as the year goes along. Does that mean that gasoline prices would head higher in conjunction with that, if indeed that holds out to be true?
Tom Kloza: It could, but I think demand for gasoline is going to be challenged. And it is going to be challenged by a couple of things. I like to call Ben Bernanke the 'Accidental Architect.' And even though he does not head the Fed anymore, his policies of very, very easy money led to a lot more money flowing in commodities and keeping the price of crude oil high. That in turn, led to the oil shale boom.
Easy money has also made for relatively brisk car sales, but as people replace their 11-year-old cars with newer vehicles, they find they get five, six, seven, eight miles per gallon more. So it is very challenging to look out at the next eight months or so and think of gasoline demand really outpacing what we saw last year, or years ago. And we are going to get nowhere near the peak demand years of 2007 and 2008.
Mark Hamrick: So that sounds like for consumers, that is pretty good news.
Tom Kloza: It is actually good news. I mean when you think about it, people are going to get new cars, they are going to get better cars, they are going to pay less for fuel, and the aggregate bill in the United States is going to be lower.
We are also producing much, much more crude than we have since any point since like the mid-'80s, and we are going to have a rendezvous with crude oil production numbers that we have not seen since the 1970s. So as our balance payments are doing well, and we really are, although most people do not stop and think this, we are living in a privileged continent right now in terms of energy costs.
Mark Hamrick: Now of course, you have worn a number of hats, and you are wearing a GasBuddy hat these days, and that is a terrific app that helps people to sort of have transparency on what gasoline prices are in their locality, or wherever it is they care to look. How do retailers respond to that level of transparency? In other words, if I am a gasoline seller, am I mindful of what the price is in the neighborhood or the Zip code, and trying to price competitively? I know that is a very complicated area.
Tom Kloza: Yes, for the most part, it is a very, very competitive landscape out there, and there are a few different models. There is the big-box model where gasoline is not so much a profit center as it is kind of some sort of seduction to get people inside the box and spend money on the higher margin items. And to a certain extent, that happens with some of the newer convenience stores where people look to break even or make a little bit of money on gasoline, but get you inside to buy the deli items and the other high-end merchandise.
So it is a mixed market out there, it is very, very competitive. There are two kinds of schools of thought for gasoline prices. There is one that suggests that, well, brand is going to mean a lot and these additives and this particular nature of a grade of gasoline is going to be -- fetch a premium from the motorists.
And the other scheme of thought is that no, no, no, you are going to have to have a very competitive price, and brand means nothing nearly what it meant let us say in the '60s and '70s. I think when we look at it, we think that you almost always have to have a very competitive price to sell some fuel out there that sells fuel briskly. And that is one of the reasons why the GasBuddy app has been growing exponentially. You can find the cheapest gas, and we find that most people do not really care that much about brand unless they have some sort of a loyalty program. But ultimately, if they have a loyalty program, they may think that they are paying for their gasoline somewhere else.
Mark Hamrick: Yes, most people are loyal to low prices, that is for sure. Tom, this is terrific information, thanks so much.
Tom Kloza: No problem.
Mark Hamrick: Tom Kloza, he's chief analyst with GasBuddy. He spoke with us from Palm Springs, Calif.
Particularly for Americans east of the Rocky Mountains, it seemed to take forever for spring to arrive. But after a tough winter, what's ahead for the housing market this spring?
For that, we turn to Bankrate's Sheyna Steiner.
Sheyna Steiner: As the weather warms up, the housing market will heat up as well. This spring homeowners may be able to cash out some equity as home prices rise, and buyers may find themselves shopping for an adjustable-rate mortgages rather than a conventional loan.
Mortgage rates will rise this spring. The 30-year fixed rate should average about 4.9 percent by the third quarter of this year according to estimates. That means homebuyers should lock in a rate as soon as possible after finding a home.
Don't panic, though: rates are not expected to go above 5 percent in 2014.
If buying a home is on your agenda, don't wait too long to start shopping. Home prices are predicted to rise steadily for the rest of the year. More sellers will probably list homes in coming months, which should take some pressure off of inventory, and that means prices won't skyrocket but they will keep inching upwards.
For more on this and other personal finance issues, visit Bankrate.com. I'm Sheyna Steiner.
Finally, our look at this week in business history:
April 17, 1964. Talk about putting the pedal to the metal. Fifty years ago, Ford introduced the Mustang in North America. Back then, the price began at a little over $2,300. Today, a new Mustang will cost you about 10 times that amount, with suggested retail price beginning at $22,500.
You've been listening to "Your Money This Week."
If you enjoyed the podcast please check us out on iTunes and rate and subscribe to our program.
For more on this and other personal finance issues, visit Bankrate.com. And you can follow us on Twitter @bankrate.
Thanks to producer Lucas Wysocki for his work in the studio and to colleague Sheyna Steiner.
I'm Mark Hamrick. From all of us here at Bankrate, here's hoping you have a great week.
We can get it for you: Retail
There was a bit of preview of the government's reading on retail sales as the major store chains released their monthly sales numbers last week. Those individual reports are subsequently compiled by the International Council of Shopping Centers, which said sales were up 3.6 percent from a year earlier.
The trade group's economist, Michael Niemira, says, "It paints a picture that March (consumer) demand was stronger than it was in February."
Niemira's own expectations for sales growth this year are on the conservative side. As he puts it: "I'm not a believer that we're on a path to 3 percent or more growth, even into next year."
What's holding back the consumer? The negative factors include frustratingly slow improvement in both employment and incomes, Niemira says. In other words, more people need to be working and making more money for retailers to see substantial improvement at their registers.
Buying any chocolate bunnies?
With Easter just days away, the National Retail Federation says consumers will be shopping a bit less for the holiday this year.
The trade group surveyed about 6,400 Americans and found they plan to spend about 5 percent less than last year on Easter meals, clothing, gifts, candy and other items. The survey also found fewer Americans are planning to celebrate Easter.
Sounds like the Easter Bunny needs to get a new public relations person.
Breaking ground on homes
Attention turns to construction on new homes this week, with the National Association of Home Builders releasing its builder sentiment survey. That comes a day before the government's report on housing starts -- or new-home construction and building permits, a gauge of future activity.
Housing suffered a bit over the winter months, and weather was deemed the key culprit.
The first quarter of the year "was extremely disappointing relative to where we expected to be at the beginning of the year," says David Crowe, chief economist for the homebuilders association. He says the March numbers should provide a better idea of whether the slowdown in January and February was primarily weather-related.
What else is hurting housing?
Factors other than weather are troubling the housing market, too.
"The most difficult one is tight credit," Crowe says. He blames the combination of rising mortgage rates and tougher underwriting standards, prompted by the Dodd-Frank financial reform regulation.
Another problem for the housing sector is slower job growth in recent months. As a kind of rising or falling tide for the economy, the job market's health has an inevitable impact on just about all of us -- perhaps even including the Easter Bunny.
Business history: Rev your engines
On April 17, 1964, Ford introduced the Mustang in North America at the New York World's Fair. Back then, the price began at a little over $2,300. Today, a new Mustang will cost you about 10 times that amount, with suggested retail prices beginning at about $22,500.
Incidentally, just to compare, we plugged that 1964 price into the inflation calculator and found that it would translate to about $17,400 today. So, the cost of a "pony" has risen a bit more than inflation overall.
Follow me on Twitter: @Hamrickisms.