April 19, 2024
Inflation has fallen. Why are groceries still so expensive?


Americans are finally getting a reprieve from inflation, with prices for gasoline, used cars and health insurance falling last year, providing relief to families and boosting President Biden’s 2024 re-election bid. But prices remain painfully high for one particularly frequent purchase: groceries.

Grocery prices have increased 25 percent over the past four years, higher than overall inflation of 19 percent during the same period. And while prices for appliances, smartphones and other goods have declined, groceries became slightly more expensive last year, with particularly sharp jumps in other items including beef, sugar and juice.

Sky-high grocery prices are having a serious impact on the finances of millions of people and, along with housing, remain perhaps the most persistent economic challenge for the Biden administration as it tries to convince Americans that the economy is strong again. Is in position. With all the focus on gas prices and housing, more than two-thirds of voters say inflation has hit them the hardest due to higher food prices, according to a November 2023 survey by Yahoo Finance/Ipsos. This is more than 50 percentage points higher than any other category.

But there is no immediate solution for policymakers. Grocery prices remain high due to a mix of pandemic-related labor shortages, ongoing supply chain disruptions, drought, avian flu and other factors beyond the administration’s control. Economic policy experts say strong consumer demand has also fueled a shift toward more expensive groceries, and consolidation in the industry gives big chains the ability to keep prices high.

“I think people are waiting for prices to return to what they call ‘normal’ levels – and except for a few things like eggs – we’re not going to see that. We will see prices stabilize, and that’s likely,” said Don Thilmani, an agricultural economist and professor at Colorado State University.

The left-wing think tank Groundwork Collaborative reported Friday that nearly 30 percent of the increase in grocery prices was driven by just five categories of foods that are particularly sensitive to supply chain shocks, including beef, chicken, Fruits and vegetables and snacks are included.

If inflation is falling, why are gas and groceries still so expensive?

Not all news is bad. The rate of growth in grocery prices slowed substantially last year, falling to 1.3 percent from 11.8 percent a year earlier.

And while grocery prices have increased overall, some food items saw substantial declines. Egg prices fell more than 20 percent last year after rising. Salad prices fell 17 percent, and Tomato prices fell by more than 7 percent, amid other similar declines.

This momentum is expected to continue: The Agriculture Department expects grocery prices to decline 0.4 percent this year.

“Up until last year – three years into the pandemic – we had not made any major progress toward ending the labor shortage. So it will take some time,” said Claudia Sahm, an economist who works at the Federal Reserve. “Deflation is not going to happen equally across all parts of the economy at the same time.”

Pointing to the decline in costs paid by producers, the Biden administration has said grocery stores could do more to relieve shoppers of sticker shock. An administration spokesperson also cited actions taken so far to lower fertilizer prices, improve the efficiency of the meat and poultry industries, and pursue an antitrust agenda to increase competition in the agricultural sector. The Groundwork Collaborative report urged the Biden administration to take further action, including finalizing new rules to reduce concentration in the meatpacking industry.

“President Biden has made clear that as input prices fall, corporations must pass those savings on to consumers,” White House spokesman Michael Kikukawa said in a statement. “The Administration is cracking down on exploitative and anti-competitive practices in meat and poultry markets, supporting state law enforcement efforts to stop practices that drive up food prices, and doing all we can to lower grocery prices for families. Taking available avenues.”

As doomsday predictions fail, Biden aides enjoy booming economy

High grocery prices reflect many economic factors. Food prices began rising early in the pandemic, when supply-chain disruptions and labor shortages collided with strong demand for groceries. But recent developments have kept prices high: drought and extreme heat have reduced production of fruits and vegetables. Sugar exports have declined due to drought in India and Thailand. And the largest avian flu outbreak in U.S. history sent chicken and egg prices soaring, although egg prices fell after the initial rise.

Higher wages at processing plants, warehouses and grocery stores have also increased costs. Meanwhile, Russia’s invasion of Ukraine in early 2022 sent commodity prices of wheat, corn and vegetable oils soaring, which are eventually settling back down.

At the same time, demand for food — especially meat, nuts and fresh produce — remains high, as Americans are spending on higher-quality specialty goods and organic goods, according to Colorado State University’s Thilmani. Even after taking inflation into account, households are generally allocating more to groceries than before the pandemic, she said, because their shopping habits have changed.

“People started spending a lot more on groceries during COVID, and that has stuck for a large group of Americans,” Thilamani said. “They’re saying, ‘I’m still going to get that rib-eye or New York strip, even if it costs more’ — and that drives the prices higher.”

A new report from the White House Council of Economic Advisors also found that grocery store profit margins are higher than their pre-pandemic levels.

The economic environment is improving, consumer sentiment is on the rise

In Phoenix, Quentin Wetterloss and his family are spending 70 percent more on groceries than before the pandemic. Their weekly supermarket sales exceeded $6,000 last year, up from about $3,500 in 2019, partly because they are eating better with more fresh herbs, whole wheat pasta and Kalamata olives.

Still, he says they’re shopping more, switching between Fry’s Foods, Safeway and local farmers markets for the best deals.

“High prices have prevented us from making a lot of purchases or simply making purchases,” said Wetterlos, a 37-year-old data analyst whose household income has increased 40 percent since 2019. “We look at the weekly deals and only buy what’s on sale.” Or need.”

Grocery prices play a big role in people’s perception of inflation. Unlike more infrequent expenses — car insurance, say, or property taxes — which can deliver a similar dose of sticker shock, the intense frequency of grocery trips makes price increases harder to swallow, said Ross Steinman, professor of psychology at Widener University. Professor who studies consumer behavior. “When you’re buying a carton of eggs or a gallon of milk every week, it’s staring you in the face over and over again,” he said.

Low-income families have been hit hardest by rising grocery prices, spending 31 percent of their income on food, compared to 8 percent for wealthier families. Food insecurity is on the rise and food banks across the country have reported a significant increase in demand over the past year, especially after the expiration of additional pandemic food stamps last February. (Yet, the Biden administration also approved the largest-ever expansion of the food stamp program, resulting in an additional $36 per month per recipient at that time.)

As pandemic gains continue to wane, a major blow to households and the economy is becoming

The Rhode Island Community Food Bank in Providence now serves about 80,000 people per month, a 20 percent increase from a year ago, according to Andrew Schiff, the food bank’s chief executive.

“This is absolutely the impact of high food prices,” he said. “The high cost of groceries, coupled with very high rents and utility bills, has been a major burden for low-income families. We believe that if food becomes scarce, it will be of great help. “That’s what we’re hoping for – that food prices will fall next year.”

Jasmine Sanders works two jobs at H&R Block and a home health care company, but still struggles to afford food for herself and her two young children in Helena, Mont.

The single mother receives about $200 a month in food stamps, enough to buy two weeks’ worth of groceries, she said. Sanders and her son are lactose intolerant, which requires them to purchase expensive items like oat milk and dairy-free yogurt. But she’s cutting back wherever possible, buying more common items and less fresh produce, and has started stopping by a local food pantry once a month.

The difficulty of putting food on the table is forcing 23-year-old Sanders to reconsider his political leanings. Until a few weeks ago, she wasn’t planning to vote in this year’s presidential election because both candidates seemed so much alike, “sitting at those fancy desks making decisions for rich people.” But recently, people at work have started talking politics and she has started to change her mind. Sanders feels his financial situation is slipping and says he is worried about the future.

“Right now, Trump looks like a better person,” he said. “Last time, I thought he had a lot of scams. But now inflation is rising, the way prices are, it seems they want to make the economy better for people like us.

And yet Donald Trump’s policies Grocery prices are ready to be raised, not lower. The former president is campaigning to impose new tariffs on trillions of dollars of imports and mass deportation of undocumented immigrants, which would significantly raise the cost of domestic beef, chicken and dairy products. But at least for now, the politics of high grocery prices are more likely to become a problem for Biden.

Trump has promised to reduce inflation. His plans may restart it.

Democratic pollster Celinda Lake said, “People are really confused as to why food prices are going up and down – the thing that really stands out to people is the irregularity.” “Every day, people are saying: I used to leave the grocery store with three bags. And now it’s two for the same amount of money.

Source: www.washingtonpost.com

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