Prices: how high is up?

 

Shoppers who buy at supermarkets and chain stores perceive the cost of living as having gone up dramatically, but it may not be as bad as they think.

And even if all living costs in the long term trend up, there is nothing particularly onerous at work.

In short, the economy is not in any trouble it hasn’t been in many times before.

This is the cheerful view of Solvang economist Kenneth Harwood, Ph.D., a sharp contrast to the gloomy picture painted July 15 by Federal Reserve Chairman Ben Bernanke, who said that the nation’s economy has become so erratic that there is little government can do to damp its gyrations.

Shoppers questioned outside a supermarket last week seemed to think Bernanke had the better grasp of things.

While many shoppers declined to speculate about the future of the economy, some did step up and discuss their concerns.

 

Talia Shelly of Buellton, with daughters Leah, 5, and Maya, 2, said unequivocally that prices are up, “especially produce.” She’s “still paying more” and feels that “it’s outrageous.” Shelly works in the payroll office of a construction company.

Pauline Schneekloth, also of Buellton, has two kids, ages 19 and 17, and a husband. “I did notice” higher prices, she said. “I’m buying things more on sale. I notice gas prices; it’s costing me $75 to fill up the car.” Schneekloth is taking it all in stride, however: “The bottom line is, it’s causing people to buy less and be less wasteful.”

Gerry and Gary Johnson of Solvang are retired and are the parents of nine grown children. Gerry said living costs are “definitely higher.”

Her husband added, “Not surprisingly, fuel prices are up. You have to tie it to everything.”

Gerry Johnson said firmly, “If we had a large family still at home, I’d be making bread, making casseroles.” Her husband added, “I have to admit, we only shop sales.”

Lompoc resident Michelle preferred not to give her last name. She has kids and a husband at home and stated firmly that prices are higher. “Absolutely. Yes, it’s tied to fuel,” she said. “I buy smaller amounts and have less waste. I do more canning and use what I’ve canned.”

 

Economist has rosier view

Kenneth Harwood, the Solvang economist, took a more sanguine view.

“Gasoline costs are a lot higher than they were recently,” he said.

“But look back 40 years or so, you see that gas prices are a share of personal expenditures and are pretty much what they were in 1970 and in 1985. We’ve been there before.”

He looks at fuel costs as a share of each person’s weekly across-the-board expenditures, and claims that with that qualification, fuel prices are not so bad.

“What you spend on motor vehicles is less than it was in 2000, and much less than in 1987 and less than 1960,” he said. “One reason is, there’s more competition.

 

Your running costs are national, not local. It isn’t that things are great. But autos are cheap and energy, while it was [cheap] at one time in the past, is readjusting. Many items are rising. When energy goes up, just about everything goes up.”

Commodities are going up, he said, some more rapidly than others, and the rise is rooted in transportation costs.

“It costs more to move stuff,” he said. “A feather duster weighs more, it’s better quality [than formerly], it has to be transported. We know they’re going up, over the long haul we pay more.”

But Californians have an edge over most of the rest of the country, Harwood said.

“We’re very lucky in California. In season we get things pretty cheaply, and they are fresh. They’re not shipped very far.”

 

Prices go up and down in the short run, but in the long run they go up, he admitted. “It’s the law of supply and demand. Prices have tended up because of the value of the dollar.”

In the short term, he said, prices go up and down; in the long term, they go up.

“There’s been a rather sudden change, and it’s caused by the value of the dollar. “But there’s a positive side. The value of the dollar could make it easier to sell American products.

“You accommodate to what you need. People are buying more carefully, choosing between the name brand and the house brand.

“It’s not even gloom and doom in the short run,” he concluded, with a chuckle.

“Some gloom, not so much doom in the long run.”