Hunger Pains: Understanding the Food Inflation Rate
Two things should be known about me — I don’t like spending money and I’m an absolute foodie.
When it comes to food, I usually don’t feel too badly about treating myself to a fancy meal or even ordering a ridiculously overpriced cup of coffee. However, with food costs rising, I’ve become a bit more hesitant to splurge like I used to.
To prove that my apprehension about rising food costs isn’t just due to the fact that I live in Los Angeles, one of America’s most expensive cities, let’s look at a key economic indicator — the U.S. Food Inflation Rate. (See graph below)
Food is a major component of the Consumer Price Index (CPI), which is used to calculate the inflation rate by comparing the CPI month to month and tracking the overall price changes of the goods counted in the CPI. The food inflation rate focuses on CPI goods in the food category, accounting for both the cost of “food at home” and “food away from home” (U.S. Inflation Calculator). Each month, the prior month’s cost is subtracted from the new month’s cost, and then that difference is divided by the prior month’s cost. The above graph might appear to show prices going down; however, this graph is actually showing the rate of inflation slowing or speeding up. Inflation rates vary, but any positive rate of inflation means that prices are higher than they were a year earlier. Since the pandemic, prices have increased significantly faster than they have in the last 40 years. In 2022, the yearly average price increase of food was 9.9%, a significant leap from the usual ~2% increases of the past 20 years. (U.S. Inflation Calculator). While this number is anomalous for younger generations, those who remember the late 1970s would recall even higher food price increases. In 1973, the yearly average price increase was 13.2%, in 1974 it climbed to 13.7%, and in 1979 it hit 10.7% (U.S. Inflation Calculator). By expanding the timeline of the U.S. Food Inflation Rate, it is clear that inflation hit some extremes in the 1970s. (See below graph)
Below is another graph from the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers: Food in U.S. City Average. This graph conveys similar data about the CPI for food, but narrows the scope to look at average prices in U.S. cities. This graph gives a good sense of inflation rates, as it’s easy to see that prices don’t go down, but rather continuously increase, albeit at different rates.
The story told by the graphs above align with my experience as a consumer. After the pandemic descended in early 2020, food prices began a steep climb. These prices continued to climb into mid 2022. While I’ve been shocked by the high inflation rate, my parents, who remember inflation in the 1970s, tell me to stop complaining. Nonetheless, high prices are still a bother.
Nothing encapsulates my experience better than when I was out at a restaurant in West Hollywood in March of 2022. The menu posted on Yelp showed the dish I wanted was priced at $18. To my dismay, the same dish was now listed as $25! Apparently the menu on Yelp was out of date, but only by two years. In just a few years, the price had increased by nearly 33%. According to the Department of Agriculture’s Economic Research Service, “In 2022, food prices increased by 9.9 percent. Food-at-home prices increased by 11.4 percent, while food-away-from-home prices increased by 7.7 percent” (ERS). I can say with certainty that nearly all consumers felt the weight of those climbing prices.
While graphs of food inflation mirror the consumer experience, graphs of producer prices (first graph) and import prices (second graph) explain why consumer-facing prices changed so severely. As the graphs below show, the pandemic triggered a wave of delays and difficulties that made getting food onto grocery store shelves and into the hands of restaurants a costly undertaking.
By understanding what’s behind the price listed on the menu, it makes sense why that West Hollywood restaurant had to hike up their prices so quickly. Unfortunately, food prices won’t be going back down. Thankfully though, it appears that food inflation has slowed its climb and I might be able to get my caffeine fix for under eight dollars, at least for now.
