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The Bacon Indicator: What Sizzling Prices Say About the Economy
CNBC.com | August 16, 2010 | 02:34 PM EDT

First it was beer , and now — gasp! — bacon prices are on the rise.

The price of bacon has surged 20 percent from last year to more than $4 a pound, according to the Department of Agriculture, which is largely due to a pork belly shortage at peak bacon-consumption season (because tomatoes are ripe right now, which means BLT sandwiches, which means more bacon).

How could this happen, you ask? At a time when America needs bacon more than ever?

It’s the question on everyone’s minds: “What’s Up With the High Price of Bacon?" , Slashfood asks. And the National Review calls rising bacon prices “Obama’s Next Crisis.”

Well hold on to your frying pan because, as it turns out, it’s actually a good sign for the economy.

Hog supplies are low because farmers pared back their herds in the past few years due to the recession. At the same time, demand has started to pick up.

“We’re seeing consumers making their very first step toward taking that luxury item,” said Rich Nelson, director of research at Allendale Inc. “They may not be buying steak instead of hamburger, but they will put bacon on their hamburger or other things,” he explained.

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