Month-to-month inflation data is timely but can also be noisy. For comparison, when gasoline prices-the focus of much of the prior research into the sensitivity of inflation expectations-rise by 1 extra percentage point, near-term expectations tend to increase by around 0.14 percentage point, not much higher than the grocery inflation and expectations relationship. The CEA found that 1 additional percentage point of food inflation is linked to an increase of about 0.11 percentage point in one-year inflation expectations in the University of Michigan survey. When groceries become relatively more expensive, households incorporate that experience into their expectations of future overall inflation in the near future. One additional sign of just how salient grocery prices are to families is their effects on household inflation expectations. For comparison, gasoline was 3 percent of total consumer spending in 2021, household utilities were 6 percent, and shelter costs-including rent and mortgages-were 20 percent.įact 2: Grocery inflation affects households’ expectations of overall inflation. Īccording to the Consumer Expenditure Survey, groceries made up around 8 percent of total consumer spending in 2021, and more than 11 percent for people in the bottom fifth of the income distribution. Ahead of next week’s data on the Consumer Price Index (CPI) for May, the CEA lays out five facts about grocery prices and their recent dynamics.įact 1: Grocery prices matter deeply for families. However, in recent months, grocery inflation has finally begun to show signs of cooling. Grocery inflation stayed higher than normal for much of the pandemic thereafter, driven by a variety of factors, including: pandemic-induced shifts in food demand from restaurants to groceries, global supply chain bottlenecks, and unforeseen supply shocks like avian flu, the war in Ukraine, and poor weather. Get Involved Show submenu for “Get Involved””Īlmost immediately after the pandemic began, food processing facilities slowed or paused operations and grocery prices began to climb.The White House Show submenu for “The White House””.Office of the United States Trade Representative.Office of Science and Technology Policy.Executive Offices Show submenu for “Executive Offices””.
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