Finance Column » Your Money This Week » Inflation served by the cup

Inflation served by the cup

By Gregg Fields ·
Monday, February 28, 2011
Posted 10 am ET

One of America's most fitting corporate nicknames may have to be discarded. Blame the economy.

Not Mickey D's, Big Brown or the retailer Tar-zjay.

Rather, it's a coffeehouse star, staffed by baristas, a word not in Webster's. (Neither is frappuccino.)

It's the company commonly called "Four bucks." Will we soon be saying five?

It's admirable how this company bucks adversity. Great Recession aside, it charges what might be called latte-da prices for coffee in a paper cup. But problems are percolating.

Commodity prices are surging around the world, in large part because developing countries are growing more prosperous. They're splurging on previously unaffordable luxuries, like breakfast.

But coffee prices -- prodded by a global shortage -- are the real eye-openers. With coffee beans at their highest level in decades, those costs are getting passed along.

Smucker's recently raised its Folgers brand prices around 10 percent -- its third hike in a year. Kraft hiked Maxwell House roughly 15 percent in December. Where have you gone, Joe Dimaggio? Has Joltin' Joe  left and gone away?

Starbucks hasn't done any venti-sized price hikes yet, and says it hopes to avoid them. Still, you might take a fiver with you next time.

Meanwhile, Libyan unrest scared the oil markets. Everyone knew it'd eventually mean higher gas prices. The surprise was they arrived just hours after trouble hit the shores of Tripoli. Supertankers must be getting faster.

Officially, Fed Chairman Ben Bernanke says U.S. inflation remains quite low. One rebuttal might be, then why are prices rising? This week the government raised 2011's estimate of food price inflation, but only to 3 percent to 4 percent from 2 percent to 3 percent.

Economists aren't alarmed because food and fuel are considered ''noncore'' inflation. That means they're volatile, which frankly doesn't take an economics degree to discern.

The problem is, core or noncore, pay it you must.

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