Biden economists claim progress on grocery inflation
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The form of inflation that causes the most day-to-day discomfort is grocery inflation. White House economists have released a new analysis suggesting that the discomfort is finally improving.
Why it matters: Everybody has to eat, so when food becomes more expensive, it is particularly vivid and painful. But the data shows that grocery inflation has come off its high boil — with some commonly consumed items actually becoming cheaper — and that wage growth is catching up.
The big picture: Grocery prices have risen rapidly over the last three years, but most of that rise happened in 2021 and 2022, not more recently.
- Overall "food at home" prices rose only 1% over the 12 months ended in May, but that 1% rise occurred on top of the earlier price run-up, fueling discontent with inflation that has been a major driver of overall negative views on the economy.
- But some grocery prices have fallen outright over the last year, including for apples (down 13.2%), potatoes (down 3.2%), ham (down 5.4%), cheese (down 3.4%) and milk (down 2.1%).
Driving the news: In a new blog post seen first by Axios, the White House Council of Economic Advisers notes this progress and takes it a step further, finding that relative to average wages, groceries are now as affordable as they were in 2019.
- By the CEA's calculations, it takes 3.6 hours of pay for the average non-supervisory worker to afford a typical basket of groceries, down from nearly 3.8 at the start of 2023.
- The economists find "that grocery inflation is, in fact, way down from its recent peak, some grocery prices have fallen, and because wage growth has been strong, grocery purchasing power is up."
- They note that major grocers like Aldi, Target and Walmart have announced price cuts "which may not have shown up yet in the data."
Yes, but: The change in average wages is just that, and masks a wide range of different experiences consumers face in terms of their earnings. Not everybody has experienced the kinds of pay raises reported in average data, but pretty much everybody must pay more than they did four years ago for food.
- Moreover, the psychology of inflation is such that it is unclear how much weight people put on how their grocery bill compares to their wages.
- To economists, higher worker pay and higher consumer prices are two sides of the same inflationary coin, but many people view pay increases as something they earned through hard work, while higher grocery prices are an unfair burden placed upon them.
