WORLD> America
As costs rise, inflation's next front is retailers
(Agencies)
Updated: 2008-07-28 10:09

"We have seen inflation and we have passed some of that through," said John Simley, a Wal-Mart spokesman. "We have, wherever possible, worked with our suppliers to reduce the inflationary impact as much as possible."

Costco Wholesale Corp. said Wednesday its fourth-quarter earnings would be "well-below" Wall Street estimates of $1 a share as it delays price increases. Stock in rival BJ's Wholesale Club Inc. fell more than 10 percent as investors feared the competitor would have to match Costco's prices.

Some economists say that once Americans spend their $106.7 billion in tax rebate checks, consumer spending may shrivel, sparking a round of price cuts to entice shoppers. Others think price increases may be postponed, but they're on their way.

Much of this depends on how much money consumers have after buying gas and groceries -- and what kind of mood they're in once they've filled their tanks. On Friday, The Reuters/University of Michigan index of consumer sentiment for July came in at 61.2, beating expectations and slightly better than the 28-year low of 56.4 hit in June. Still, the confidence index was at 90.4 a year ago.

Even Costco said it won't swallow price increases from suppliers on key items, but would postpone passing them along to consumers, if only for a few weeks, because it wants to be the last retailer to raise prices.

The company raised its prices for rotisserie chicken from $4.99 to $5.49 about three months ago. Last week, the prices rose to $5.99.