How grocery prices have changed over the last four years

Grocery prices, an ongoing concern during the Biden administration, have been a significant problem for many Americans. Although rapidly rising food costs have begun to slow, food inflation remains a top concern for voters, according to recent polls.

Over the past four years, grocery prices have risen significantly, putting pressure on household budgets. A YouGov poll released last month indicated that 64 percent of Americans consider inflation a "very serious problem," with grocery costs a top concern. Despite this, there has been some relief, as the pace of food price increases has gradually slowed in recent months.

 

Recent trends in food prices

 

New data this week is expected to show whether the cooling trend in inflation has continued. Economists predict that headline inflation probably rose 3 percent in July, matching June's increase. Such results could influence the Federal Reserve's interest rate decision, with possible cuts anticipated in September.

Over the past year, grocery prices rose 1.1 percent through June, a significant drop from the peak increase of 13.5 percent seen in August 2022. Despite this slowdown, grocery prices have not declined; they continue to rise, albeit at a more moderate pace. Compared to four years ago, grocery prices are now about 20 percent higher.

 

Factors behind the price increases

 

Rising grocery costs result from a combination of supply and demand pressures, many linked to the pandemic and other global events. Initially, the pandemic caused a shift from eating out to buying groceries, with consumers stockpiling essential commodities. This was compounded by disruptions in supply chains, as workers in grocery stores, warehouses, and meat processing plants were affected by Covid-19.

In early 2022, Russia's invasion of Ukraine further exacerbated the situation by increasing energy prices and the costs of key commodities such as grains and vegetable oils, which, in turn, raised food production and transportation costs. More recent factors, such as droughts and an outbreak of avian flu, have also put pressure on food supplies.

David Ortega, a food economist at Michigan State University, noted that most food costs come from activities that occur after food leaves the farm, such as transportation, packaging and processing.

 

The future of food prices

 

Looking ahead, several economists expect grocery inflation to remain at current levels in the coming months, barring any major disruptions. The Department of Agriculture has forecast that "food at home" prices will increase 1 percent in 2024, compared to a 5 percent increase last year.

While some food categories, such as beef and veal, have experienced above-average inflation, others, including ham, milk and seafood, have experienced price declines in the past year.

However, the possibility of weather-related disruptions, such as an active hurricane season, could affect food supply and lead to higher inflation, according to Meagan Schoenberger, a senior economist at KPMG.

 

Policy implications of grocery inflation.

 

High food costs remain a significant political issue for the Biden administration. On the campaign trail, Vice President Kamala Harris, the Democratic presidential candidate, has acknowledged the problem, promising to address price gouging if elected. Meanwhile, President Biden has criticized food and beverage companies for what he describes as excessive profits and has called on grocery chains to lower prices.

Some food companies have responded by signaling plans to reduce prices on specific products in response to declining consumer purchases. For example, PepsiCo has announced intentions to reduce prices or offer more promotions on certain snacks and other items.

Despite these efforts, many consumers remain frustrated by the persistently high costs of groceries and other essential expenses. For some, like Jerlyn Heisz, a 79-year-old retired nursing assistant from Platteville, Wisconsin, rising costs have made it difficult to afford anything beyond basic necessities.

Ms. Heisz, who lives on a fixed income of $1,500 a month, said her grocery bills have risen to as much as $150 a month, up from about $100 before the pandemic. Although she has cut back on purchases, especially of fresh fruits and vegetables, she does not blame President Biden for the increased costs, despite the challenges she faces.