Grocery bill still high? Blame 'sticky' prices

Worries over a global recession have pushed the price of oil to its lowest in over a year. Don't expect the same for a bottle of beer, a tube of toothpaste, or a box of cereal.

You can blame "sticky" prices.

That's what analysts call it when companies slap higher prices on products and keep them there even though the rationale for the price hikes - such as soaring oil prices - is gone.

The falling cost of oil could help companies pad their profit margins as they pay less to make and transport goods. But it won't mean a break on the average grocery bill.

The price of consumer goods typically lags behind the price of key inputs like oil and wheat, said Chris Lafakis, an economist with Moody's economy.com.

"Consumer prices don't change near as fast, because they are set by companies," Lafakis said. "Commodity prices are set every day on an open market."

The opposite is also true: Companies hesitate to hike prices because it might push consumers to into the arms of a competitor, or to cheaper alternatives.

Meat companies like Tyson Foods Inc., for example, have swallowed losses this year as ingredient costs rose because executives were fearful consumers would abandon their products if prices jumped too fast. Tyson's profit plunged 92 percent in the third quarter and the company said it didn't expect a rebound soon.

But once a price hike is in place, it virtually never goes away, Lafakis said. The one factor than can drive prices down is a drastic drop in demand, but few economists expect the global economic downturn to be so severe it would cause widespread deflation, he said. More likely is that inflation will slow or possibly flatten.

That was the case last month, when consumer prices were essentially flat, even as oil prices plunged.

Read the Rest Here at The Associated Press. 

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