Bad news for the thinning wallet: veggie prices just got higher

Prices for food nationwide edged up slightly in June but masked an unusually large increase in fresh vegetables.

Rising consumer prices generally reflect an increase in producer prices, which analysts agree won’t ebb anytime soon.

“The increase is not a temporary spike in input costs,” said Bill Lapp in a report released Wednesday by his company, Advanced Economic Solutions, which provides economic and commodity analysis.

“Consumer food inflation during the last half of 2008 is expected to continue to move higher, as more of the rising costs faced by producers are expected to be passed through to consumers during the year,” Lapp said in the report.

According to the consumer price index just released by the Labor Department food rose 0.8 percent in June, including a dramatic 6.1 percent increase for fresh vegetables.

In the Chicago area (extending to Gary, Ind. and Kenosha, Wisc.) food prices were down 0.65 percent for June but up 1.52 percent over the past six months on a not-seasonally adjusted basis. This amounts to a 3.13 percent inflation rate for the full year.

Ephraim Leibtag, an economist with USDA’s Economic Research Service, says not to be fooled by the jump in the price of fresh vegetables nationwide.

“In general they are some of the more volatile items just because of supply and availability,” Leibtag said.

“Tomato prices month-to month were up 18.1 percent, so that really pushes the overall average a lot higher.”

Leibtag said the increase in tomato prices can be credited to the suspected salmonella scare in the tomato population this summer.

“Pricing is a lot higher when you have a supply problem,” he said. “The fact that a whole host of tomatoes were basically taken off the shelf and not available means that the average price for buying a tomato went up quite a bit from month to month.”

Overall, Leibtag considers the 6.1 percent increase in fresh vegetables to be a temporary issue.

“It’s a food safety problem and we have those all the time,” he said. “The two biggest issues from month to month and year to year with fresh fruits and vegetables are if there is a food safety problem or if there is a weather problem that deals heavy damage to a crop.”

Liebtag said the rise in the price of consumer food is an expected response from retailers who have seen their own wholesale food costs go up. This is due in part to higher energy prices and the increasing cost of raw commodities like wheat and corn, which are used to produce much of the food that people consume.

“Everyone is really facing the same increase in costs,” said Leibtag.

“I am not very optimistic that prices are going to fall in real terms or even in nominal terms. The only question we have now is 'When will inflation start to stabilize?'” he said.