By Stephen DeAngelis
Not everyone is buying a new car or new clothes; however, everyone is buying food. As a result, they know when their pocketbooks are being pinched by grocery bills. Even when the overall inflation rate started to decline back in 2022, grocery prices continued to rise. In July 2022, grocery journalist Sam Silverstein reported, “Food-at-home prices spiked 13.1% in July on a year-over-year basis, a pace that exceeded the level logged in June even as the overall rate of inflation lost steam. … The relentless increase in what people are paying for groceries is having a clear impact on their shopping patterns.”[1] At that time, Matthew Pavich, Senior Director of Strategy & Innovation at Revionics, told Silverstein, “The longer inflation goes on, the more likely it is for consumers to make permanent the behavior changes they’ve adopted during these inflationary times — whether that’s switching to more private-label products or buying a larger share of their essential goods at dollar stores and value-driven grocers.” In an election year, the price of groceries could have a significant impact on who gets elected.
Presidential candidates are fond of asking, “Are you better off now than four years ago?” For many people, the answer to that question has little to do with facts. Economic correspondent Abha Bhattarai explains, “The presidential election is less than a year away, and economic issues are once again top of mind for voters around the country. Despite the economy’s rapid recovery from the pandemic, President Biden has struggled to convince Americans that his policies are improving their finances. In polls, the majority of Americans still say they trust former president Donald Trump’s handling of the economy over Biden’s.”[2] She goes on to note, “Each administration has left its mark: Biden, by adding 14 million jobs in less than three years, bringing the Black unemployment rate to a record low and reducing student loan debt by billions. Trump, meanwhile, presided over a period of low inflation, low interest rates, and low gas prices.” What she fails to mention are food prices. Food prices affect everyone and are likely to play an outsized role in the coming election.
Feeling the Pain of Higher Food Prices
To illustrate how high food prices have risen, journalists Stephanie Stamm and Jesse Newman “analyzed NielsenIQ data reflecting a selection of commonly purchased items that were valued at a total of $100 in 2019 [and found] that, [in 2024 the] same grocery list costs 36.5% more.”[3] That fact undoubtedly plays a role in how Americans feel about the U.S. economy. The Editorial Board of the Washington Post explains, “America’s economic mood remains glum. This is despite great news: Growth is strong; the stock market just hit record levels; unemployment is low; and inflation has significantly cooled in the past year. Dig a little deeper into public sentiment and there’s a striking dichotomy — the vast majority of Americans (72 percent) say their personal finances are all right, but only 22 percent think the national economy is in decent shape, according to a chart the Federal Reserve recently released. … Why? The main answer is inflation.”[4] The Editorial Board goes on to note, “The partisan divide explains some of the negative sentiment, though not all since independents are also gloomy.” They also make another interesting point: “The media’s negative economic coverage might also help explain the glum mood.”
There is some good news. Markets correspondent Emily Peck reports, “The inflation rate for ‘food at home,’ basically the stuff you buy at the supermarket, is really low these days, with prices rising just 1.1% over the last year.”[5] Unfortunately, there is a “but” to that overall situation. Peck writes, “But since January 2021, when President Biden took office, prices are up nearly 21%. … Every time Americans go food shopping they feel the sting of higher prices, making the grocery store the place where consumers are most regularly reminded about inflation.” Unfortunately, reporters (and, therefore, consumers) can’t always explain why food prices are higher. Philip A Loring, an Adjunct Associate Professor at University of Guelph, and Ryan M. Katz-Rosene, an Associate Professor at the University of Ottawa, researched articles about food price hikes. They found, “Most claims about food prices in these reports lack scientific rigor. Nearly two-thirds of the explanations for price changes given are not backed by evidence. Arguments about the causes of food inflation are frequently incomplete, neglecting to connect the dots between cause and effect. For instance, reports may identify the influence of unfavorable weather, climate change or changing retail demand, but fail to elaborate how these translate into actual price increases at the till.”[6] One reason for this lack of “scientific rigor” is that the food supply chain is both complex and confusing. That makes connecting-the-dots more difficult, especially when it comes to where the biggest mark-ups are being made. Loring and Katz-Rosene conclude, “While the reports do identify potential drivers of food prices, they have some noteworthy gaps. While extreme weather events and climate change are sometimes offered as abstract reasons for food price increases, some major environmental issues, like biodiversity loss and collapsing fish stocks, do not appear in reports, despite a widespread understanding that they will impact food price and availability.”
They go on to note, “These reports also rarely consider the decisions that grocers and other private sector entities have on food prices. Increased consolidation and concentration in the grocery sector is a structural issue that deserves scrutiny. … In the United States, there is strong evidence that the private sector has been profiteering on supply chain issues and inflation. The U.S. Federal Trade Commission likewise recently found that big grocers used the pandemic as a smokescreen to pad their profits at the public’s expense.”
Concluding Thoughts
During this election year, inflation is likely to be a serious topic of discussion — especially the high price of food. Republicans will stress high prices and Democrats will stress easing inflation rates. According to Peck, the Republicans are likely to win on this issue because the Democrats (and experts) don’t seem to realize that consumers have their own definition of inflation. She explains, “The meaning of the word ‘inflation’ has changed. It used to mean rising prices; now it means high prices. … Pedants, economists, and style-guide editors might not like it, but if you want to understand what people mean when they complain about inflation, you need to understand how the vernacular has evolved over the past couple of years.” The Washington Post‘s Editorial Board agrees. They conclude, “Telling Americans the economy is better than they realize doesn’t make much impact in an era when many are still in shock about the rise in prices. Good news about employment and growth isn’t registering. Politicians who try to win support by citing those numbers — we’re looking at you, Mr. Biden — have to find a new language for a new post-inflation psychology, acknowledging the price shock while projecting confidence that it’s being overcome. Wages are now rising quickly, and major companies, such as Target and Aldi, are cutting prices. Recovery takes time. This is not an easy message to convey. But it is a realistic one.” In Part Two of this article, I will discuss how consumers are changing their behavior in response to high food prices. In the concluding part of the article, I will address how brands and retailers, like Target and Aldi, are responding to changing consumer behavior.
Footnotes
[1] Sam Silverstein, “Grocery prices spike 13.1% even as overall inflation slows,” Grocery Dive, 10 August 2022.
[2] Abha Bhattarai, “Biden’s economy vs. Trump’s, in 12 charts,” The Washington Post, 23 December 2024.
[3] Stephanie Stamm and Jesse Newman, “How Far $100 Goes at the Grocery Store After Five Years of Food Inflation,” The Wall Street Journal, 4 April 2024.
[4] Editorial Board, “Telling Americans the economy is good won’t work,” The Washington Post, 29 may 2024.
[5] Emily Peck, “Why grocery bills feel so high, even though food inflation is technically low,” Axios, 28 May 2024.
[6] Philip A Loring and Ryan M. Katz-Rosene, “Why are grocery bills so high? A new study looks at the science behind food price reporting,” The Conversation, 26 May 2024.
