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Wednesday, March 30, 2011

It's not financial Doomageddon.

But it's a bit of a personal eye-opener. The price of milk increased $0.13 per gallon over the past week. We buy our milk at Costco, and in bulk to save us multiple stops during the week. Two Saturdays ago, skim and whole milk cost $1.95 a gallon. Last night, it was $2.08.

No, it's not much and our demand is pretty inelastic. But Costco tries to hold off until the last minute on passing increases to the customer, so it's something of a trailing indicator.

Moreover, little increases across the board on staple items start to pinch income, slowly but surely, even if it's not officially considered "inflation" by the government.

That might explain why the Fed has experienced some static of late.

And it might explain why you get less bang for the buck in food purchases even when the price hasn't increased.

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