published Sunday, January 22nd, 2012

Chattanooga consumer prices in 2012 expected to fluctuate

A few Chattanooga wallets could get lighter in 2012, as economic headwinds blow financial turmoil across the Atlantic to U.S. shores.

Or, supply and demand could drive down prices on consumer goods, leaving Americans with extra spending money jingling in their pockets.

It’s all a matter of perspective.

In the market for the latest electronic toy? Then you’re in luck, because falling prices on tablet PCs and computer memory could make holding off on that purchase until after the holiday seem prescient.

Airline travel, on the other hand, may be heading for new highs, as airlines work to enact a second round of fare hikes that Delta Air Lines initiated on Jan. 17, following a successful $10 to $20 hike begun on Jan. 11, according to FareCompare.com.

What’s certain is that with overall economic growth expected to remain flat for the year, 2012 could look a lot like 2011.

Inflation boosted prices an average of 3 percent in 2011 — the biggest increase in four years, according to the U.S. Bureau of Labor Statistics.

The growth in inflation in the 12 months ending in December included a 10 percent jump in gas prices but a 3.7 percent drop in the price of natural gas.

GAs

Unleaded gas hit a high last year of $3.98 in May, and the low was $3.07 in January, according to AAA.

Higher prices in 2012 could be driven by a stated desire by oil producers like Saudi Arabia to sell at $100 per barrel, combined with economic uncertainty in Europe and concerns with Iran’s threats to block important waterways in the Middle-East, said AAA spokeswoman Jessica Brady.

Unlike some industries where falling demand leads to falling prices, falling gasoline consumption hasn’t stopped the rising cost at the pump.

“It doesn’t look like we’re going to see oil fall substantially, so we could see gas get to $4 gallon by summertime,” Brady said.

AIRFARES

“In 2012, the airlines have indicated that they will shrink capacity, removing seats from the air transportation system, thereby making each available seat more valuable,” said Christina Siebold, director of marketing and communications for the Chattanooga Metropolitan Airport Authority. “This will have particular impact on domestic travel.”

In addition, the way airlines present their fare information to consumers will change, as new consumer protection rules take effect.

The rules require airlines to advertise their fares “with all government taxes and fees included,” Siebold said.

“Previously, airlines separated the taxes from the base fare until the final purchase,” she said.

Taxes and fees, as a general rule, represent about one-fifth of the final ticket cost, so travelers “may have an initial case of sticker shock,” she said, though there are “still good deals to be found, especially if travelers are flexible with their planning.”

TV AND INTERNET

Most, but not all, TV and Internet distributors plan to raise prices this year, though EPB has no current plans to raise rates.

The companies say the new prices mainly are driven by content costs as TV networks up the fees they charge cable providers for popular TV shows and programming.

New technology, like mobile content delivery and wireless features, is also raising the cost of doing business.

While most prices for Internet service are also rising, some Comcast customers will see their high-speed Internet fall by a dollar, and some of Charter’s “Internet Ultra” customers will see prices fall by $12.

Though TV is getting more costly, televisions are falling in price as manufacturers race to clear out last year’s inventory to make way for this year’s new models.

New TVs will be thinner, brighter and connect to other devices in the home, like a Wi-Fi-equipped hard drive or even a tablet.

Tablets, too are falling in price, as the arrival of new models forces retailers to slash prices on previous-generation hardware.

GROCERIES

As grocery prices have escalated, stores have begun to respond to diversifying consumer tastes, including demand for organic and ethnic goods. Larger grocery retailers like Walmart Supercenters are squeezing traditional grocery stores like Food Lion on the low end, while niche organic retailers like Greenlife Grocery are attracting high-end customers, the Bureau of Labor statistics wrote in an analysis of the grocery segment.

Competition from “supercenters and warehouse clubs will cause some grocery stores to close and others to get bigger or specialize in order to compete,” the BLS wrote.

Perhaps because of the turmoil in the grocery business, the number of wage and salary jobs in grocery stores is expected to experience “little or no growth through 2018,” though all industries combined are projected to grow by 11 percent, the agency reports.

ELECTRICITY

The mild winter has kept usage low, and the utility’s fuel cost adjustment has gone down in five of the last six months, TVA spokesman Scott Brooks, a downward trend that could continue to push down prices.

“If we have a milder winter, that may continue, but if we have a hotter than normal summer, it may get more expensive,” Brooks said. “We are expecting a cold first half of February, but it won’t be enough to impact fuel costs.”

Rainfall is also predicted to be at or above normal into the fall, which helps refill the lakes and reservoirs that power TVA’s dams.

“We are forecasting in general a mild summer in the valley, which should be good news for power demand,” Brooks said.

Outside of fuel cost adjustments, the next possible wholesale price increase wouldn’t even be discussed by TVA’s board until fall, Brooks said.

NATURAL GAS

The combination of a mild winter that has led to decreased gas usage for household heating, and a growing supply of natural gas — projected to last more than 100 years — is helping to keep prices low, said Larry Buie, region manager for Chattanooga Gas.

“[‘Fracking’] has brought more reserve gas into the system, and that’s holding those prices down,” Buie said.

Recent advances in “fracking” technology has enabled producers to revisit older natural gas formations that were previously thought to be nearly tapped out, which is cheaper than drilling into a new formation.

“We’re not having to go out and do exploration; most of that is in existing formations,” Buie said. “We’re able to bring more gas to the market.”

However, because of the way that long-term contracts are signed for the delivery of natural gas, lower consumer prices could take as long as three months to appear on heating bills, he said.

WINE

Since California farmers began growing grapes decades ago, wine- making — and wine drinking — has taken off in the U.S., said local vintner Ray DeBarge.

As wine fever spread to the East Coast, states like Tennessee and Georgia began producing grapes for other wineries, and some broke off to create their own brands.

“It’s more accessible and more acceptable,” DeBarge said. “I think I’ve counted 25 wineries in Tennessee, and it seems like we’re probably adding one or two a year.”

Increased availability has led to more diverse pricing, with many drinkable wines available for as little as $5 or $10, he said.

“There’s basically a wine for every mood and every season,” he said.

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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