If the great magician Harry Houdini were alive today, the one thing he could never escape from would be inflation.

It affects the rich and the poor — though of course to varying degrees. Over the past few months, every third story in the business press seems to have been about how well consumers are weathering high prices.  So far, they have done it pretty well considering the huge spike in gasoline caused by the instability in the Middle East.  The fact that consumers have persevered is remarkable considering how much the prices for so many things have gone up in such a short time.

Clothing makers such as Hanesbrands were forced to raise prices this year after cotton prices reached highs not seen since the administration of Ulysses S. Grant.  This phenomenon is even pushing up the costs of producing a dollar bill, ironically enough.  Earlier this year, McDonald’s Corp said it would raise prices on selected menu items because of rising costs for agricultural commodities.  This applies to every aspect of the meal. Prices for winter wheat are soaring because of bad weather in certain parts of the country and export controls.  Prices for red meat may rise 7% to 8% this year, ensuring that the Quarter Pounder With Cheese pressures the bottom line of McDonald’s along with the waistlines of its customers.

• Read The Ten Consumer Product Prices About To Rise Dramatically

Yes, even the humble French fry is not immune to the power of inflation.  A carton of Idaho russets recently sold for $22.24, up from $9-$10 last year.  The Packer newspaper reports that prices may climb even higher.  The coffee?  Prices for the beans needed to produce the caffeinated beverage may rise as much as 40%, according to Bloomberg News.  Kraft Foods and JM Smucker have already raised prices.  The chocolate chips in McDonald’s cookies?  Prices for chocolate have soared recently because of instability in the Ivory Coast, the largest cocoa producer.  Hershey Co. announced a 9.7% increase in wholesale prices in March.

When people think about rising gas prices, they think about the rising costs to fill up their tanks.
That’s understandable, considering that gas is climbing toward $4 a gallon and many politicians, even friends of the industry such as House Speaker John Boehner, continue to berate the oil industry over their sky-high profits.  But there are by-products of oil prices that many consumers don’t consider–such as diapers. For instance, Kimberly Clark Co. recently announced that it was raising prices on its Huggies diapers, pull-up training pants and other products by 3 to 7% because of costs of raw materials such as those that are petroleum-based.

Even though Americans remained worried about their economic futures, they are less concerned about their present circumstances.  Consumer spending increased in March by 0.6%, following a  revised 0.9% gain in February.  Most experts expect the economic recovery to continue to crawl along as long as oil prices don’t spike dramatically upward.  Scott Hoyt, director of consumer economics at Moody’s Analytics, says he is fairly bullish about the future.

‘We’re experiencing some increase in core inflation, but declines in food and energy inflation ,” he says in an interview. “We are expecting oil prices to flatten out soon and head lower. Obviously, there are risks to that forecast.”

Indeed, some experts are expecting oil prices to continue to rise, raising the spectre of a double dip recession.  Analysts at Bank of America Merrill Lynch argued that consumer sentiment would sour if people have to continually spend more money to fill up their tanks. So far, that hasn’t been the case.  The Thomson Reuters/University of Michigan Consumer Sentiment Index released recently showed a gain in April versus March.

Investment sentiment also remains largely positive as reflected by the gains in the main stock market indices.  Corporate profits have been good during what some are considering one of the best earnings seasons ever.   The Dow and NASDAQ just had their best months since December.

‘Consumers are continuing to modestly grow their spending,” Hoyt says, adding that has been boosted by the reduction in the payroll tax.  “We are seeing spending growth that is not what it was in the fourth quarter but that continues to be healthy.”

1. Southwest Air Fare
> Parent Company: Southwest Airlines Co.
> Price Increase: $10 Per Round-Trip Flight
> Reason: Rising Jet Fuel Costs

The price of jet fuel has become the airlines’ greatest operating expense as the price per gallon has risen more than 40% in the past year. Southwest was one of the latest carriers to announce it would be raising its fares as a result of increasing overhead. Gary Kelly, company Chairman, President, and CEO announced that operating expenses, not including the massive rise in fuel costs, were up more than 10% compared to the previous year. Kelly stated that the company will be increasing the price of nearly all domestic round-trip flights by $10. Delta Airlines recently reported it would be raising fares as well.

2. Huggies Diapers
> Parent Company: Kimberly-Clark Corporation
> Price Increase: 6%
> Reason: Increased paper/lumber price

Kimberly-Clark, the paper-manufacturing consumables company, announced worse-than-expected first quarter profits. During its earnings conference call, Chairman and CEO Richard Falk stated that the corporation had taken “a pretty big hit on margins when pulp spiked,” referring to the price of pulpwood, which is used for the paper in most of its products. The company announced that in order to account for falling revenue, it would be raising the price of several of its products. This includes a 6% increase in its popular line of “Huggies” diapers.

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3. GM vehicles
> Parent Company: General Motors
> Price Increase: $123 On Average
> Reason: Rising Oil and Metal Prices

In a phone interview last month, a company spokesperson announced that GM would be raising the price of all of its vehicles by an average of $123. The spokesperson said the changes would go into effect May 2nd. GM announced that the reason for these increases were not related to the Japanese earthquake last month, but were due to rising prices in oil and metal. This comes in the wake of the new that GM competitor Toyota would be raising sales prices an average of 1.7%.

4. Hanes Underwear
> Parent Company: Hanes Companies, Inc.
> Price Increase: n/a
> Reason: Rising Cotton Prices

As the price of cotton has continued to skyrocket, The Winston-Salem-based clothing company has been raising prices on a variety of items since February. In its recent earnings report, Hanes announced a major increase in net income the first quarter. In the same report, the company announced it would hike its prices on socks and underwear, partially as a result of the success of previous increases to account for commodity costs.

5. McDonald’s menu Items
> Parent Company: McDonald’s
> Price Increase: 1%
> Reason: Rising Livestock Prices

In its first quarter earnings conference call, McDonald’s CEO Jim Skinner stated that the fast food giant would be raising prices across a variety of its products. Company CFO Peter Benson explained: “We are seeing cost increases on virtually every item in our basket, with beef accounting for about 1/3 of the additional increase. Reduced herd sizes, increased demand and a weaker U.S. dollar driving up exports are all contributing to the increase in beef costs.” In the U.S., The company had instated a 1% price hike across the board in early March, and it plans to implement a similar increase some time in the next few months.

6. Nike Sneakers
> Parent Company: Nike
> Price Increase: n/a
> Reason: Rising Oil, Cotton, and Labor Costs

In the company’s third quarter earnings report last month, the athletic wear company announced it would be raising prices across its entire product line, citing increased costs. Nike CFO Donald Blair stated during the conference call: “As we expected, in Q3, we began to see the impact of rising input costs, such as oil, cotton and labor.” Supply chain management and raising prices would be used to combat the increased costs.

7. Hershey Chocolate Bar
> Parent Company: The Hershey Company
> Price Increase: 9.7%
> Reason: Rising Price of Dairy and Sugar

Hershey recently increased prices for the majority of its products. The candy company reported  a weighted-average price increase of about 9.7% across its candy and grocery lines. Hershey cited rising raw material costs, as well as fuel costs, for the new prices.

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8. Glad Trash Bags
> Parent Company: Clorox Co.
> Price Increase: 10%
> Reason: Rising Costs of Oil and Resin

Due to rising commodity costs, Clorox Co. is raising prices on its Glad trash bags by almost 10%. The rising costs of commodities such as resin and oil will be offset by consumers. Clorox has raised prices on Glad products for this reason before, most recently in 2008. The company is also raising prices on some of its its salad products, such as Hidden Valley ranch dressing mix.

9. Diehard Batteries
> Parent Company: Johnson Controls
> Price Increase: 5%-9%
> Reason: Rising Commodity and Handling Costs

Johnson Controls, the world’s largest manufacturer of lead acid batteries, increased the prices of its batteries by 5%-9% last month. The company cites increasing commodity and handling costs as the reason for the price changes.  These costs have to do in part with improved packaging and transportation due to new safety standards from the U.S. Department of Transportation.

10. Charmin
> Parent Company: Proctor and Gamble
> Price Increase: 5%
> Reason: Rising Energy Costs, Pulpwood Price

Facing raising energy, material, and transportation costs, Proctor and Gamble has announced that it will raise prices on a number of popular goods. The company gross margin fell from 51.9% to 50.5% this past quarter compared to last year, and now additional costs will be, in part, passed on to consumers. P&G will be raising the list price on its Charmin paper products by 5%. It will also reportedly be raising prices on Pampers diapers, wipes, and Bounty products.

Jonathan Berr, Michael Sauter & Charles Stockdale

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