Cotton Futures hit an all-time high last week at $1.58 per pound, well above historic prices. Cotton has reached its peak as a result of severe export shortages in China, the world’s largest producer and consumer of cotton. If the price continues at this rate – nearly four times higher than its recent low in 2008 – the cost of production of clothing and textiles is bound to increase. Major distributors are expected to raise prices to account for the rise. Suppliers to stores like The Gap and Walmart report they will increase prices between 5% and 30% in the coming months.
3. Used Cars:
Last month, the average price of a used vehicle reached an all-time high of $15,870. One likely reason for this may be the decreased expendable income among potential buyers. New car sales are down significantly from a few years ago. A second reason for the record prices is last year’s extremely successful “Cash For Clunkers” program, which took nearly 700,000 used vehicles – which would otherwise have been resold – off the market. Americans are increasingly seeing used cars as a smart financial decision. If this trend continues, Chrysler, Ford, and GM may take further hits to their balance sheets.
Last week, the price of gold hit an all-time high of more than $1,420 per troy ounce. The precious metal has historically been used as a hedge against an uncertain economy or a weak dollar, which explains why it has roughly tripled in value in the past five years. The Fed’s quantitative easing measures are expected to weaken the dollar, which will help support the price. While it is most known as an economic safe haven, gold is also an important component in consumer electronics. If the price remains at this rate, large microchip manufacturers like Intel and Advanced Semiconductor Engineering will likely be forced to increase prices, affecting the cost of everything from laptops to smartphones.
College tuition seems to increase in any economic climate, and it has done so throughout the decade, with some private schools reaching tuition of more than $50,000. According to The College Board, the average percent increase of tuition is going up. In the last ten years, the average tuition of a public four-year college rose 5.6%, compared to a 3.3% increase in the previous decade. Private 4-year colleges experienced a 2.8% increase in the last ten years. While the percentage of Americans who attend college has historically risen unchecked, record-high costs and the recession may have a strong impact, causing some to opt out of college and go directly into the workforce.
General transportation costs are down from historic highs, correlating with the decline in the price of fuel from the 2008 peak. The prices of the largest shipping companies, however, continues to reach new highs. In September, FedEx announced the average price of domestic package and freight shipping would increase 5.9%. Last month, UPS announced the same increase for their U.S. freight shipping. The implications of increasingly expensive shipping near the crucial holiday shopping season could be disastrous for retailers. Increased overhead will damage what will already be a lackluster performance from retailers as recession-weary consumers continue to be frugal.