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Tying back to grocery prices, here’s the ulative effect of all the food inflation since 2019 on your family’s budget
From The Kobeissi Letter:
Change In Price Since 2019, by Food Item:
1. Cocoa: +345%
2. Orange Juice: +260%
3. Olive Oil: +219%
4. Sugar: +120%
5. Fruit Snacks: +77%
6. Cooking Oil: +54%
7. Chocolate Bars: +52%
8. Apple sauce: +51%
9. Beef: +51%
10. Mayonnaise: +50%
11. Loaf of Bread: +42%
12. Eggs: +40%
13. Milk: +40%
14. Cereal: +38%
15. Butter: +24%
Inflation has officially been at 3% or higher for exactly 3 years.
The Average American is now paying nearly 40% MORE for groceries than what they were paying in 2019.
Over 100 food items have seen inflation above 50% since 2019.
Have you gotten a 40% or 50% raise since 2019?
This focus on real-world prices helps explain the results of a survey by CNBC and SurveyMonkey that came out yesterday. It found that more than 65% of Americans now live paycheck-to-paycheck. That’s up from last year’s figure of 58%.
And what’s the stated reason for this strain on personal budgets?
Shocker – inflation, which was cited by 69% of survey respondents which the highest response rate in the survey.
(Technically, they should have answered “higher prices” not “higher inflation.”)
But if this leaves you hoping for lower prices, think again
The default reaction to this is to want lower prices across the board.
But while this might be attractive at first glance, such a deflationary environment is the last thing we want.
When prices fall, businesses and consumers hold their cash. After all, if prices are dropping day-after-day, then “tomorrow” is always the better time to make that purchase since it’ll be less expensive.
But the practical effect of this “tomorrow” psychology means wallets close and money stops flowing. So, companies are forced to cut prices in hopes of luring buyers into the market today, not tomorrow. But this just reinforces the deflationary mindset.
So, more wallets close. Economic growth stalls. Corporate profits margins are destroyed. Cash-hemorrhaging companies are forced to lay off employees. Household budgets grow strained. It can be an awful cycle.
Now, this might leave you scratching your head…
Okay, prices are much higher today than they were a few years ago…
But if they came down materially across the board, it would be bad for the economy…
So, does that mean we just have to live with a “new normal” of higher prices for many items from now on?
Pretty much.
For many goods and services, the trillions of dollars of helicopter money from the federal government that flooded the economy during the Covid pandemic resulted in a one-time “price reset” that bumped baseline prices substantially higher.
So, even if inflation drops to 2% (which this morning’s CPI data show isn’t happening all that easily), the new baseline price tag for many goods/services won’t ever return to where it was.
U.S. E- Commerce Sales. A chart showing revenue since 1999 shows upward growth in billions.
To what extent is the budget of the average American prepared for this new normal in perpetuity?
Poorly, if you’re in my state of California.
From CalMatters.org:
Prices have grown about 20% overall since 2020, according to an analysis by the California Legislative Analyst’s Office…
[Sarah Bohn, economist and director of the Public Policy Ins ute of California Economic Policy Center] said Californians’ wages have not kept up with inflation:
“Wages only grew 15% than before the pandemic. On paper, that looks amazing, like a $5-an-hour increase. But after inflation, it feels like a pay cut — I calculated that it’s like a $1.25-an-hour cut.”
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I'm over the age of 17 so way too old for him
