If economic indicators are right, it appears that inflation may be taking hold of the economy. The U.S. Labor Department recently reported that the Producer Price Index (PPI), a measurement of wholesale prices paid by producers, jumped by 1.9 percent in September. The rise mirrors a 1.2 percent jump in the Consumer Price Index, the measurement of prices paid by consumers. Together, the numbers confirm that the Federal Reserve's latest warnings about inflation may be justified.

While motorists have become painfully aware of higher gas prices, other goods have spiked without much fanfare. Prices for aluminum, steel, paper, plywood, and plastic resins are now ticking upward, and even the price of eggs has seen a near-50-percent jump. Although it's not definite that consumers will pay more for final products containing these materials, it is likely that recent price hikes will be reflected on retail price tags in the months ahead.

All the talk of inflation has analysts wondering who is likely to get squeezed hardest by rising prices, businesses or consumers. In the face of rising prices, businesses have two options: they may pass the increased costs on to consumers in the form of higher retail prices; or they can swallow the increased costs, trimming profit margins. The energy and homebuilder sectors have shown an ability to pass along cost increases, but other sectors such as apparel, recreation, and transportation are eating the higher costs. Although businesses may absorb some of the increases, economists say consumers should prepare themselves for the inevitability of higher prices over the near term.