Another Inflation Concern

When things change in many small steps as opposed to one large step, it is sometimes easy to overlook the significance.

The rise in gasoline prices over the past few months has taken the average national price to around $2.60/gallon at the pump.

This is undoubtedly old news to you.

The first reaction of many empty-tankers is "well, it's not as bad as last summer" when prices busted $4 per gallon.

What you may not have noticed (or maybe you did) is how fast prices jumped in a relatively short period.

Does this mean we are headed for another record price?

Probably not, but it does mean another push for the economy towards inflation.

The price of fuel affects every part of our economy, either directly or indirectly.

In a normal economy, these costs can be easily passed on to consumers or even absorbed by the company to gain a competitive advantage.

With the economy still struggling, higher gas prices will be a burden on the weak economy and ultimately raise the price of almost everything.

Most companies cannot afford to absorb these higher costs - you may have already noticed a fuel surcharge on some products and services.

Consumers will have less left to spend or save and we begin the vicious cycle all over again.

The normal response to inflation is to raise interest rates, however that will be difficult for a struggling economy to swallow.

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