From the Washington Post:
Merrill Lynch … calculated a Thanksgiving cost-of-giving index using the prices of traditional holiday meal items such as turkey, cranberries, sweet potatoes and pumpkin pie — as well as the cost of flowers, gifts ranging from toys to clothing and electronics, plus gasoline, hotels, air fare, and greeting cards.
The index has risen 7.9 percent year-over-year in the approach to the festive season — a huge swing from a drop of 4.4 percent a year ago. In fact, this is more than double the historical trend for this time of year and the second highest since 1999
If you look only at food, the increase is more along the lines of 11% according to the American Farm Bureau Foundation.
This is scary for a number of reasons. From the perspective of the Fed, it’s getting a lot harder to convince people that we have low inflation. Bernanke has argued that inflation expectations are anchored at a low level. In other words, it’s ok to focus on core inflation because people attribute price rises in energy and food to volatility, and not to structural/permanent price increases.
The other reason this is scary – and this is true of all inflationary periods – is that poor people feel the impact of inflation much more severely than rich people. If prices for food and energy keep rising, we can expect an increase in social problems/tensions in this country.