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    Price Inflation Taking Toll on Consumers

    Poll finds consumers slowing purchases due to highest price increases since last summer.

    CHICAGO -- As prices undergo the highest level of increases since summer 2006, consumers are taking a break from major goods purchasing, found Chicago-based market research firm Leo J. Shapiro & Associates LLC in a recent study.

    On day-to-day goods, spending is falling as more households cut back on food, apparel, driving and medical expense spending, the report stated. After leveling around 100 since last October, the Index of Consumables fell to 97, according to the study.

    In addition, spending freely on food fell eight points from a year ago, and one point since February of 2007. Gasoline spending held steady from March 2006 to February 2007, but fell two points to 48 during March 2007.

    Higher prices were reported by 64 percent of consumers, a nine-point increase from last month, and the highest level since August. Consumers are also fearful that prices will continue to increase -- 47 percent expect the current rate of inflation to hold or accelerate, an increase of 12 points since a month ago.

    Even as personal incomes continue to grow, fewer households believe that their income can keep pace with rising prices. Of respondents, 18 percent -- the most since December of 1990 -- felt that their income cannot keep pace with inflation. In addition, there was a five point increase -- to 38 percent -- that households feel they will face a job layoff or income interruption. While this is below the January findings, it is the highest rate of job insecurity seen since August.

    As prices increase, consumers enter defensive mode to protect against harder times, the firm stated, which results in postponing spending plans and halting current spending. "For retailers, this is an unwelcome picture. Selling harder may be unrewarding so long as consumers are fearful for their well being," the company stated in the report. "This is a moment in time when retailers would be well-advised to muster their strength to beat down rising prices."

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