IRS stimulus checks' worth stunted as gas, grocery prices soar in Chicago

A gallon of regular gasoline in Chicago has soared 20 percent since President George W. Bush proposed an economic stimulus package in mid-January. That means a $600 stimulus check from the IRS now translates to purchasing power of only $480 at the pump.

The first wave of paper checks is out this week, but if the summer driving season sees further increases in gas prices – as experts predict – weekend shopping trips won't get any easier for Chicagoans. And food is already pricey at the grocery store.

According to data from the U.S. Bureau of Labor Statistics, staple supermarket goods like eggs, bread and chicken were up as much as 35 percent in March, compared with 2007 prices.

"Food has absolutely gone nuts," said retail industry consultant Jim Dion.
For the week of May 2, the average price of a typical food basket was $59.38, compared with the January average of $57.16, according to data from Operation Food Basket, a weekly survey by Chicago's Department of Consumer Services. Items included in the basket: bread, milk, orange juice, eggs, peanut butter, meat and cereal.

But while consumers will economize at the supermarket, gasoline demand remains relatively inelastic, according to Laurie Falter, an oil industry economist with the U.S. Energy Information Administration.

Falter said that year-over-year gasoline demand has been slightly negative, but attributed the slight decline to the overall economic doldrums in which less goods and services are being moved around.

“People still have to go to work and take their kids to school,” noted Falter.

Along with increased food and gas prices, the high cost of living in Chicago devalues the stimulus check even further, when compared with the rest of Illinois.

As calculated by the Council for Community and Economic Research, in Arlington, Va., the cost of living in Chicago is about 10 percent higher than the national average and about 14 percent higher than the Illinois average. Housing, health care and transportation are more affordable outside the city, so stimulus cash will go further.

Looking at how the value of the stimulus check is affected by the broader economy, BLS economist Paul LaPorte pointed to the Consumer Price Index. The CPI measures the average change in prices paid by urban consumers for goods and services over time and is often used by private citizens as a guide to making economic decisions.

Take, for instance, a family of four set to receive a stimulus payment of $1,800. After factoring in the CPI change from January to March, the family would be receiving $1,779. LaPorte admits the difference is not a huge amount, but noted, "it's a half a tank of gas or so."

As to whether the cash salvo will provide the boost the sagging retail sector is hoping for, Dion isn't so sure. It'll be more like a "sugar dessert," he said – quick enjoyment, but little substance.

Falter added her own cold comfort: “If we weren’t experiencing an economic downturn, we would actually be seeing [gas] prices higher than they already are.”