Originally created 06/14/06

Lower-income families sacrifice to cope with inflation

CHICAGO - Wall Street is worried about inflation. So are Amy Lopez, of Eureka, Calif., and Sharon Connlley, of Duluth, Minn.

They and other Americans are increasingly feeling the squeeze of higher prices, at the gas pump and in the cost of groceries, delivery charges, travel and numerous other items.

Inflation remains modest by historical standards at about 3.5 percent. It appears no threat to return anytime soon to the double-digit rates of the late 1970s and early '80s, perhaps not even to the 5 percent level last seen in the spring of 1991.

But driven by soaring energy prices, inflation is creeping toward 4 percent for the second quarter and is on pace for the highest annual rate in 15 years.

A government report Tuesday showed that prices paid by producers rose 5.6 percent for the previous 12 months, thanks to the relentless rise in energy prices. Economists are predicting that a report due today will show that consumer prices also kept rising.

Although those rates might seem tame, the steady increase has caused so much concern that Federal Reserve Chairman Ben Bernanke is threatening to extend the Fed's two-year rate-raising campaign, sending the stock market plunging this month.

Inflation remains "an annoyance" at the moment for most consumers, said Carl Tannenbaum, the chief economist for LaSalle Bank in Chicago.

"Certainly some of these rising prices have hurt people who live on more modest incomes," he said. "But in general, these rises in prices have not crippled households at all."

Still, many are growing uncomfortable with each tick higher in rates, as balancing checkbooks gets more difficult.

Especially among lower-income workers, inflation is forcing more and more sacrifices, compromises and budget-juggling.

For Amy and Jacob Lopez, the $70 cost of filling up their Ford minivan has made it tough to get by every month and might force them to sell their car.

Mrs. Lopez, 23, a stay-at-home mom, cited the effects of higher prices for everything from rent to utilities to grocery items from milk to hamburger meat. Meanwhile, wages for her husband, who works at a flower bulb farm, have stayed the same.

"We have had to cut quite a lot of things out" to make ends meet, such as weekend outings, buying treats for their kids and visiting their grandparents, she said.

In Duluth, Ms. Connlley, who makes $9 an hour as a receptionist, is buying more noodles, lower-quality meats and canned vegetables instead of fresh ones.

"In the past couple of years, it's gotten worse," the 48-year-old said. "You go to the grocery store now and spend 50 bucks and walk out with a bag, where it used to be enough for two weeks."


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