Food Prices Up
Food prices are jumping up and bringing the overall CPI up with them. The New York Times coverage implies that this means we should be less worried about deflation, but I’m not so sure.
Normally, in terms of setting interest rate policy the Fed focuses on the “core” rate which excludes food and energy prices. They do that because food and energy prices tend to jump around quite a bit in response to events in a way that’s not closely tied to the overall price level and macroeconomic condition. But of course the fact that food and energy aren’t part of “core” inflation doesn’t mean they aren’t real, or don’t matter to people’s lives. Now we’re in a situation where the core inflation rate remains dangerously low, meaning we still need to worry about deflation, but it’s also a situation in which food and oil prices are rising. That’s a lot of hardship for consumers, and it could do a lot to strangle recovery in the crib.
14 Responses to “Food Prices Up”
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May 14th, 2009 at 11:35 am
People are stuck at home, jobless, and are eating more. Discuss.
May 14th, 2009 at 12:12 pm
Now we’re in a situation where the core inflation rate remains dangerously low
This is just flat-out false.
The core CPI is at 1.8% for the unadjusted 12 months ended 3/09, and at 2.2% compound annual rate for the 3 months ended 3/09.
The target rate of inflation is 2% – meaning both over the last 12 months and the last 3 months, we are almost exactly dead on target.
This error should be corrected.
May 14th, 2009 at 12:30 pm
The AP says Whole Foods profits are down 32%. Good. Let’s figure out a business model where you actually sell food people can afford.
May 14th, 2009 at 12:34 pm
The first quarter annualized growth in the (non-seasonally adjusted) CPI was already 4.8%! Austrian economist Robert P. Murphy believes there will be additional damaging inflation. How can there not be when the Fed, following discredited Keynesianism, has massively increased and thereby diluted the monetary base?*
http://consultingbyrpm.com/blog/2009/05/inflationupdate.html\\
*Will someone please explain how diluting the monetary base is substantively different than, for example, stock dilution of a corporation?
May 14th, 2009 at 12:38 pm
TYPO: Missing link to Robert Murphy:
http://consultingbyrpm.com/blog/2009/05/inflation-update.html
Somehow, the hyphen between “inflation” and “update” disappeared. I guess the link was diluted by the Fed.
May 14th, 2009 at 1:39 pm
Let’s figure out a business model where you actually sell food people can afford.
Why don’t you eat less and learn how to cook? We don’t need more cheap factory produced crap food. If you eat a reasonable balanced diet with fresh ingredients Whole Foods is not “unaffordable” although the produce is generally a rip-off.
May 14th, 2009 at 2:02 pm
Re Whole Foods
Whole Foods stores in the DC area just reduced the price per pound of their food bars by a buck from 5 to 7 PM in an attempt to boost sales during that time period.
Re Bob Roddis
Citing someone from the Austrian school of economics is like citing Jenny McCarthy on vaccines or the Discovery Institute on evolution.
May 14th, 2009 at 4:09 pm
Has it really taken you think long to realize the CPI is a bunch of bullshit that can be tinkered with to produce whatever number you want?
If increase or decrease the share of one good or another I can create the appearance of any level of deflation or inflation that I would like.
May 14th, 2009 at 4:11 pm
Epic analogous fail.
May 14th, 2009 at 4:38 pm
I’m no expert on ecomomics, but since i just bought some pork chops from a safeway in Baltimore for $ 1.99 a pound, prices can’t be going up too much.
May 14th, 2009 at 9:43 pm
Re: Food prices are jumping up and bringing the overall CPI up with them.
In my own grocery shopping I am not so sure I see this. Fresh foods (produce, meats, dairy and some frozen) have fallen, but processed foods have gone up. I take the latter to be the leftover effects from last year’s jump in both food and fuel prices.
May 14th, 2009 at 11:00 pm
REGARDING JonF ‘S COMMENT # 11
I would think that this is because once package foods go up they rarely go down.The makers just pocket any profits if costs go down.
Fresh meat and produce on the other hand are sort of like commidities where the prices flucuate by the week. I worked at Costco years back, and we would have to change the milk prices at least once or twice a week because of Costco’s low profit margin .
The same is true at Home Depot. Concrete bags went from $3.50 an 80 lb bag to $4 a bag during the boom.Last i checked they were back down to $3.50 again.Supply and demand of a commodity.But i doubt that they will lower their prices on a shovel or similar tools.
Incidentaly MR JonF ,I believe that you once said that you were from Baltimore.If that is so , then i would like you to know that the public markets are the best places to buy meats and produce. Lexington and North East Market are the best.Cross Street is a little pricey for me.Try Richardson’s farm at Nort East market. It’s fresh meat and produce from a local farm, and it is cheaper than the grocery store.
Good luck and bon appetit MR JonF.
May 15th, 2009 at 7:38 am
your post is interesting but I’m no expert on ecomomics
May 19th, 2009 at 9:03 am
Um, Matt’s a bit confused here. The linked article is all about the Producer Price Index, not consumer prices. Consumer prices for food fell in April (this is reflected in several comments above), while core CPI (unadjusted) rose 0.2%.
Better fact checking leads to higher quality blogging.