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NEW YORK--The trickle-down effect of higher fuel prices is expected to have significant impact on prices of other goods in 2006, according to a report in BusinessWeek.com.
The report acknowledges that the American consumer has been the hero of the economy for the past few years, accounting for some 70 percent of U.S. economic activity, but questions whether that rate can continue as manufacturers are forced to raise prices on basic consumer goods and consumers find themselves more strapped by high fuel and energy costs.
For instance, according to BusinessWeek.com, Kraft Foods, the nation's largest food manufacturer, is increasing prices an average of 3.9 percent because of rising energy and packaging costs. By Jan. 2, higher prices are expected to start rolling in for Oreo cookies, Oscar Mayer lunch meats, and Kraft Macaroni & Cheese.
The report further noted that prices for soft drinks may get harder to swallow if Coca-Cola and Pepsico pass along price hikes from bottlers to consumers. Eastman Chemical, the largest maker of plastic for soft-drink bottles, raised prices as much as 40 percent because of increased costs for petroleum, and in turn bottlers for the two soft-drink giants plan to raise prices 2 percent to 3 percent.
BusinessWeek also reported that Anheuser-Busch, the nation's largest brewer, plans to raise prices next year on such popular brands as Budweiser and Michelob. In 2005, it skipped an increase and used discounting to maintain its share of the U.S. beer market, but the company doesn't plan any such concessions next year.