What is causing it, how long could it last

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No matter what consumers buy or where they buy, they are dealing with increases in the cost of goods and services not seen in decades.

Inflation rose at an amazingly fast pace in December and is behaving in ways that some generations have never experienced.

“More than half of the US population has no memory of significant inflation,” Charles Ballard, an economics professor at Michigan State University, told Free in November.

Recent economic indicators showed that inflation is now at a near 40-year high, its steepest rise since 1982. During that time, Ronald Reagan was President and inflation was in double digits. In 1980 inflation reached an annual rate of 13.5%.

Mortgage rates went through the roof. In January 1982, a fixed-rate mortgage cost an average of 18%, Keith Gumbinger, vice president of mortgage information site HSH.com, recently told the Free Press. The early 1980s are part of what the Federal Reserve called the “Great Inflation,” which lasted from 1965 to 1982, according to Federalreservehistory.gov.

What is inflation?

The simplest answer is: inflation occurs when the prices of almost everything increase, from groceries to cars to insurance and utilities. A dollar won’t go as far as it did months ago. The Bureau of Labor Statistics tracks the prices of goods and services and reports them monthly as a consumer price index. Prices are also tracked by region and reported every two months.

More: Food prices soar as inflation experiences its largest and fastest rise in decades

More: Rapid rise in mortgage rates scares homebuyers; Fears of inflation are to blame

The prices of a wide range of goods and services have risen sharply. Consumers are paying more for most everyday necessities — like groceries, gas and rent — than they were a year ago, according to the Labor Department.

What Causes Inflation?

A culprit most reports point to is a hot economy where people have money to spend, or just want to spend. Strong consumer demand for goods and services can lead to a lack of supply, thereby driving up prices. Other factors that can cause inflation in recent decades and now have been oil production, energy costs and scarcity of raw materials.

What is driving inflation now?

It likely starts with the pandemic following the two-year point. The trickle-down effect of the pandemics on goods and services affected everyday life. When the pandemic began, shutdowns and lockdowns ensued. The economy came to a standstill. Factories were shutting down, business or leisure travel was falling exponentially, restaurants were closing or being open only for takeout, and consumers were not spending.

Many economists point to consumers receiving stimulus checks or monthly prepayments for child tax credits, which have spurred demand for many commodities.

When the economy started to open up again, it came back. Instead of a gradual reopening, consumers began to spend, spurring demand for goods and services, which drove up prices. Added to this are transport difficulties, bottlenecks in the supply chain, absenteeism from workers due to COVID-19 infections and extreme weather events such as wildfires and floods.

How does this affect food prices?

There’s a lot going on here. Whether cooking at home or eating out, shopping for groceries in stores or ordering online, the cost of groceries is a significant drain on consumers’ wallets.

In recent months, prices have risen in the six food categories tracked by the Department of Labour.

Prices rose 10% in the Detroit metro area and 7.4% in the Midwest, according to the US Bureau of Labor Statistics’ bimonthly regional report. Meat, poultry, fish and egg prices increased by 13.5%.

Phil Lempert, a California-based food and grocery industry analyst, predicts that higher food prices are likely to continue for at least another year. Lempert, also known as the “supermarket guru,” points to climate change, transportation and labor issues as culprits. Extreme weather conditions like wildfires and flooding have affected corn and soybean crops, he said.

“Until we actually get climate change under control or grow more things indoors, the bottom line is that this is going to continue and we need to rethink how we grow our food,” Lempert said.

Transportation issues include the shortage of truck drivers, the snarl at major cargo shipping ports, and the cost of shipping those containers of goods to the United States

“The reason these ships are out there is because we don’t have enough trucker manpower to offload them,” Lempert said. “Speaking to many truck managers, they complain that drivers have to sit around for 3 or 4 hours to be unloaded either at the supermarket or on a cargo ship due to a lack of manpower.”

Lempert called it a perfect storm of those factors that have impacted food prices.

“Honestly, it’s going to take 12 to 18 months and billions of dollars to rectify the situation and have a much better mindset about our food supply,” Lempert said. “It starts with the farm and goes all the way to the supermarket or restaurant.”

But people can save by not wasting groceries, shopping, buying private label and participating in loyalty programs.

“Understand that 40% of food is wasted and a good amount of it is in our homes,” says Lempert.

His advice is to make a list and it’s important to shop appropriately so you don’t over-buy or waste food.

“Before you go shopping, inventory what’s in your fridge or freezer,” Lempert said.

Dollar stores, although Dollar Tree has raised prices to $1.25, are a great way to save money on groceries, Lempert said. Items that traditionally cost $2-3 are available for a dollar.

“They have great food because they’re opportunistic buyers,” Lempert said. “Companies go to these stores when they discontinue products, change packaging and change ingredients.”

The dollar stores can buy products much cheaper than the traditional supermarket.

Private label can also offer savings of between 20% and 30%.

“It’s not the private labels that our parents bought, and many of the private labels are now better than the national brands,” Lempert said.

For meat and fish and other foods, Lempert advises checking other areas of the store, such as the freezer shelves.

“They (meat and fish) will be frozen at their peak of freshness and in many cases it will be of better quality,” Lempert said.

Look at other products throughout the store, and you may be able to find the same product for less money elsewhere, Lempert said.

Lempert expects beef and bacon to remain high.

“Anything to do with an animal because the cost of feed is so high,” he said. “Whether it’s milk, buttered eggs or beef, we’re going to continue to see price increases on those and that’s probably the biggest price increase.”

Contact Susan Selasky, food writer for the Detroit Free Press, and send food and restaurant news to: 313-222-6872 or [email protected] Follow @SusanMariecooks on Twitter.

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