Following a greater than five year rally in the stock market, I'd suggest that things have worked almost perfectly in favor of the U.S. consumer.
Lending rates have pushed toward historically low levels, allowing consumers to refinance mortgage and personal debt to more favorable interest rates. Housing prices have stabilized and begun to rise in a number of key markets, which is signaling to existing homeowners and investors that demand for home ownership is once again growing. And, most importantly, inflation has been largely under control.
This last point is a bit surprising, considering that the Federal Reserve has been fairly aggressive with its economic stimulus known as QE3. Some pundits had forecast that injecting money into the economy on a monthly basis would expand the money supply and lead to rising prices. These pundits have largely been proven wrong, with inflation predominantly tracking below 2% since 2009.
However, that hasn't stopped a number of everyday products that consumers use and/or purchase from vaulting to an all-time high in terms of price over the past year. Some have been caused by Acts of God, leading to shortages of the product in question, while other products have trudged higher simply on account of improved demand.
Here are five everyday products that have recently tipped the register at an all-time high.
Beef: It's what's for dinner! It's also what could be causing Americans around the country to open up their wallets, because prices continue to hit one record high after another. An exceptionally cold winter pushed cattle feed costs higher and moved cattle yields lower for a number of farmers, prompting the significant hike in ground beef prices that you see below:
While meat producers might seem like an obvious beneficiary, if prices rise too quickly it could reduce consumption and make a traditional purchased meal not seem as cost-effective. Take the buyout of Hillshire Brands (NYSE:HSH) by Tyson Foods (NYSE:TSN) as a good example of what volatile prices can do to a company's valuation. Both Tyson and Pilgrim's Pride got into a bidding war over Hillshire, with both companies looking to diversify their product line and take advantage of record meat prices. The end result, however, could be Tyson vastly overpaying for Hillshire considering that higher beef prices could turn consumers toward cheaper food sources.
One company in particular that's really feeling the pinch is Chipotle Mexican Grill (NYSE:CMG), which recently decided to boost its prices for the first time in years. What previously had been a $0.35 premium to order steak as opposed to chicken will not cost consumers between $0.70 and $0.80 extra. This is a tough balancing act for Chipotle as it needs to maintain its margins to fuel its nationwide expansion, but it also has to be careful not to scare away its core customer.
2. Health insurance
We may not think of purchasing health insurance as an everyday item, but with the passage of the Patient Protection and Affordable Care Act, purchasing health insurance is required by the individual mandate unless you qualify for a handful of exemptions.
Unlike beef prices which may come as a bit of sticker shock for consumers in the grocery aisle and in restaurants, rising health insurance costs come as a surprise to just about no one. Higher premiums are a reflection of rising branded-drug costs, as well as the passage of the PPACA, which allowed individuals who had pre-existing conditions to be covered for the first time. The purpose of enacting the ACA is to slow medical cost inflation over the long term by spreading costs over a greater percentage of the population (both healthy and sick), but higher average premium prices are something citizens should mostly be accustomed to by now.
I know I just crushed the dreams of millions of people, but bacon-wrapped "anything" is likely getting more expensive by the day. According to data from the Bureau of Labor Statistics, sliced bacon prices per pound have surged by more than 50% over the past four years, from $3.86 a pound in May 2010 to $6.05 a pound as of this past May.
Per industry experts, the bulk of the blame for rising pork prices lies with California's drought, thin cattle herds, and a recent pork virus, which have taken their toll on bacon supply. Similar to rising beef prices, it's the end-retailer that's biting their nails with concern. Costco Wholesale (NASDAQ:COST), like Chipotle, has had to boost prices for bacon and steak as a direct response to rapidly rising costs per pound. Since Costco offers its products to members in bulk, it's quite possible that they may not even notice (or care for that matter) that prices are rising, but it's still a potential concern investors in Costco should be monitoring.
I have bad news for you if you're in the market for a new car: The average price of a car or truck is tipping the scales at record levels. According to my colleague and Foolish auto specialist John Rosevear, who examined the topic of auto affordability in March, the average price for a new vehicle in the U.S. as of March was $32,086, up from around $30,300 in September 2012.
What's pushing car prices higher? In this case it's nothing more than demand. The insatiable desire for newer gadgets within the interior of new vehicles, coupled with costlier fuel-economy upgrades (e.g., hybrid engines and all-electric vehicles), has pushed new vehicle prices ever higher to the point that Bankrate.com insinuated that the average American family can no longer afford the average new car.
What's potentially worse news for consumers is that used vehicles offer no escape. According to a wholesale price report from April compiled by the National Automobile Dealers Association, its seasonally adjusted used price index hit an all-time record high, fueled by aggressive purchasing by used car dealers following sluggish winter sales.
All in all, it looks as if loan financing periods for new and used vehicles are only going to lengthen moving forward.
5. Movie tickets
A movie theater ticket might not come across as an "everyday item," but considering that between 1.22 billion and 1.58 billion movie tickets have been sold in each of the past 20 years, it would equate to each American going to the movies four or five times per year. In other words, it's a fairly common entertainment expense for most people.
Unfortunately, the emergence of streaming movies through a subscription service like Netflix (NASDAQ:NFLX) has pushed movie theater attendance down almost steadily since 2002. To make up for falling attendance movie theaters have turned to higher concession food and drink costs as well as higher ticket prices. According to the National Association of Theater Owners, the average price of a movie ticket last summer jumped to $8.38 from $7.96 in the year-ago period. As USA Today notes, this is actually down on an inflation-adjusted basis (yay!), but that's hardly a consolation when you have an entire family in need of entertainment.
Higher movie ticket prices will likely continue to push cash-strapped consumers away from theaters and toward their couch to catch somewhat new releases on Netflix. Even with Netflix's price hike for new customers to $9 a month from its previous price of $8/month the cost of entertaining a large family when factoring in concession costs in a movie theater heavily favors the Netflix business model.
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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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