What’s up with food prices?

Consumer polls show that although inflation is down and the jobs reports are favorable, many Americans view the economy as heading in the wrong direction. In an August 2023 Gallup poll, 42% of respondents rated economic conditions as poor. Another 35% rated it only fair. Economists and the Biden administration say we have it wrong. Why don’t we get it?

Maybe it's because the state of the economy for many Americans is measured by the ratio of income to bills, and one measure that is not coming down sufficiently is food prices. Between the shopping cart and the checkout, life has not gotten better, and the evidence is apparent every day. According to an April 2023 Pew Research Report, 72% of Americans are very concerned about the price of food.

1. The Consumer Price Index shows that “Food Prices at Home” surged from May 2021 through August 2022, outpacing “All Items” by a large margin, 13.5% (food) vs. 8.3% (all) at its height. This food price premium remained throughout 2023 until August of this year. Bear in mind, too, that the August increase of 3% (Index 303.716) is compared to that August 2022 high of 13.5% (Index 295.007).1 Moreover, some food categories such as cereals and bakery products remained stubbornly high, at 6% over the year.

2. Retail sales at grocery stores continue to climb even as other inflationary prices decline. From January 2021 to August 2023, grocery store revenue increased 16.7%.

3. But, while grocery store sales rose then mostly leveled off after November of 2022, goods have not returned to pre-inflationary prices. Food manufacturers’ profits continue to climb--some at a rate that vastly eclipses inflation.

Although supply chain issues have been resolved, economists predict that food prices will not return to pre-pandemic levels. Consumers have shown that they are willing to pay higher prices and the food companies have reaped the benefits. At that same time, shoppers will continue to feel the squeeze of budgets that do not spread far enough. No wonder that the Consumer Confidence Index fell again in September 2023 as it continues its bumpy ride to recover from COVID-19’s physical and financial ills.

1. U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCNS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CPIAUCNS, September 19, 2023.

Tags: market research, consumer price index, cpi, cci, food prices, food manufacturers, grocery stores, inflation