Official government data says consumer inflation has fallen .2% in the past year. I don't know about you, but it doesn't seem to me like prices are falling.
It came as a total surprise to me that grocery prices have fallen nearly 3 percent in the past year, one of the biggest category declines. I would have guessed prices at the supermarket were up.
But it turns out, prices for nearly every aisle have been coming down, including beef, milk, eggs and fruit. If you're curious about the exceptions, they're breakfast cereals, sugar and carbonated drinks.
Which brings us back to my question, why haven't shoppers noticed such widespread price declines?
Part of the reason, I think, is that a 3% annual decline doesn't translate into much in any one individual grocery purchase. Plus, most people don't buy the exact same basket of goods week after week, making comparison difficult.
But, I also think it has to do with the fact that people pay closer attention to price increases than decreases. Fuel costs have risen sharply in the past few months. Ditto for have health care. Those increases have attracted far more attention than any small benefit in price declines.
Do you agree? Do you have a different take? Were you surprised to learn grocery prices have fallen?
Comments
I do not believe food prices are going down. If the government looked at things properly, it would show price inflation (though less than in previous years). I have noticed lower quality packaged food. Less flavoring and lower grades. This is not factored in to CPI. It is inflation!
Same goes for products. Chinese made products are low quality, inferior and safety hazards. They cut corners on products left and right. Good luck finding US made products.
With thousands of products to choose from, anyone knows that from week to week, from one supermarket to another, the prices go up and down weekly on the same item. It would be no stretch to "shop" the items and record the item price that's on sale that week, to come up with a basket of goods showing a 3% decrease. After all, corporate profits, home sales, inflation numbers, unemployment numbers - all are manipulated to produce the desired results, and certainly finding items to justify a 3% decrease would be the easiest of all. Love to see if anyone could exist on the government's basket of goods, too!
I definitely agree we are much more sensitive to price increases than decreases. This is why it is so important to have a comprehensive strategy to fight inflation so that inflation expectations do not grow out of control. The PPI report contained an ominous surge in the prices of services (my partner at "Inflation Watch" wrote about this)
I definitely agree we are much more sensitive to price increases than decreases. This is why it is so important to have a comprehensive strategy to fight inflation so that inflation expectations do not grow out of control. The PPI report contained an ominous surge in the prices of services: http://inflationwatch.wordpress.com/2009/11/18/core-finished-goods-ppi-declines-but-service-sector-prices-accelerate/
I noticed large price increases in the basic basic staple foods I buy regularly this year (carrots, potatoes, beans, rice), up until the current month when some of them dropped sharply for promotional sales.
The price of eggs here rose 100 percent over the last six years, then rose an additional 40 percent this month. I know the snack chips I used to buy for $1.50 per 15 oz bag five years ago now sell at $4.00 in a new 12 oz bag. The aged cheddar cheese I used to buy for $5.00 a pound now costs $12 a pound, but I haven't bought it in years. I also stopped buying candy bars 4 years ago, when they were frequently sold 5/$1, they now retail at $.69 each.
I tracked every food purchase in a spreadsheet years ago, and I have seen an average price increase of more than 100 percent over the last five years. So, a decline of 3 percent this year is definately not significant.
I have noticed grocery prices decline over the last several months. Meat is regularly on sale for less than $2.-/lb. for example. The small decline for food overall hardly makes an impression when medical insurance and property tax each exceed the annual food budget, especially when they consistently increase at or near double digit rates. I think it would be an interesting exercise to see if anyone could actually sustain themselves based on the official baket of goods without turning into a basket case.