It was only a matter of time. The coronavirus is wreaking havoc with our health, our jobs, and now it’s busting a big hole in our grocery budgets. The prices on groceries for April were actually the highest they’ve been in decades!
Prices at your supermarket are rising sharply because coronavirus has disrupted the food supply chain. You’ve been hearing for weeks that there are cracks in the supply chain even though the government has tried to deny it. It is just starting to reach into your pocketbook and the score for now looks like we are in trouble. When you are out of work, as over 30 million Americans are right now, the last thing you want is to have prices on groceries busting wide open!
What Are the Stats?
While we still have plenty of resources—produce, meat and other edibles—the limited production schedules we are experiencing is the reason American grocery prices have soared. According to reports by the Bureau of Labor Statistics this week, the price of groceries grew 2.6%, including seasonal adjustments, in April. That was the biggest increase from one month to the next since 1974.
What Is the Main Reason for These Grocery Price Increases?
With most restaurants having to shut down (or drastically reduce their business to takeout) in March and April, Americans started cooking every day at home, and demand for groceries shot way up. The problem was and is that food producers and farmers didn’t have the ability to quickly shift their food production and deliveries from restaurants to grocery stores. Supply chains are super-complex and turn like a huge ocean liner does with three speeds: slow, slower, and are you kidding me?
The virus caused the supply-demand imbalance to grow even more out of whack when meatpacking plant employees started to catch coronavirus by the hundreds in many of the plants around the USA. That created a huge backlog of product with no place to go as meat producers had to shutter plants across the country, and the result is that the United States now faces a growing meat shortage. That drove prices way higher.
Panic Buying and Hoarding Isn’t Helping Prices
Despite the fact that you didn’t need to load up on everything you saw at the grocery store, that’s exactly what most people did over the past several weeks and that put huge pressure on the supply chain too.
Panic-shopping customers bought food they didn’t actually need to eat immediately. This flies in the face of good shopping habits even under the circumstances of a pandemic, and all it did was to make it even harder on everyone to find what they actually really needed. If you have been shopping, you know that you have seen many items disappear and some shelves completely void of products altogether.
Some grocery stores have placed limits on purchases to keep from running out of stock. Others are raising prices to ration certain items, and some are passing rising costs directly onto consumers as they face higher costs from their suppliers. So it’s economics 101: food supplies are pinched and demand is high. That makes prices go up.
There’s No Way to Escape It Right Now
For the moment, you are going to have to be a much better shopper and really plan ahead so you buy only what you will need and use. If you don’t, you’re going to blow a hole through your food budget pretty quickly and that hole isn’t just for your family dinner plans. Every part of your grocery bill is climbing right now, even eggs which led the list last month with the biggest increase!
If you were thinking about making an omelet to start your day, you might want to think again. It’s going to cost you because egg prices shot up 16.1% in April. But even switching it up and trying cereal won’t help much. Breakfast cereal prices rose 1.5% and so did milk, bread and juice, with 1.5%, 3.7% and 3.8% increases, respectively.
Even trying to give yourself a treat got more expensive as doughnut prices shot up 5.0% last month, and muffins got 4.7% more expensive.
Here’s a List of Prices on Groceries That Rose Just Last Month
- Coffee: Roasted coffee prices rose 1.2% and instant coffee was up 2.5%.
- Canned Soup: Up 2.6%.
- Carbonated Beverages: Up 4.5%.
- Cookies: Packaged cookies rose 5.1%.
- Fruit: Up 1.5%, led by apples (4.9%) and oranges (5.6%). The entire citrus category was up 4.3%.
- Beef: Up 3.3%, hot dogs up 5.7%.
- Pork: Up 3.0%.
- Chicken: Up 5.8%.
- Fresh Fish: Up 4.2%.
The news isn’t much better even if you’re trying to stay healthy. Vegetables rose by 1.5% and canned vegetable prices soared 3.6%. Even feeding your baby got more expensive too. Baby food prices rose 2.7%.
Does All This Mean Inflation Is Going to Ruin You Now?
Not necessarily. Why? First, you have the control of your shopping dollar and if you go to bat with a proverbial two strikes against you—being unemployed and having no shopping plan—you may be in trouble. But you can change that!
Continue to plan ahead, use your pantry, and clip coupons for your favorite store. Use a real list and budget and be creative when meal planning. It’s always important, but even more important under tough circumstances. Buy what you need and only what you need and reduce waste. Prices on groceries may be heading up, but you can still shop smart to save.
Even with the overall jump in food prices, prices for all goods actually fell by 0.8% on a seasonally adjusted basis in April, making it the largest drop in prices since December 2008. But that’s an alarming drop!
Why? Prices were dragged down by falling gasoline and energy prices. Even though that might sound like a good thing, it actually might not be…
When excluding food and energy, prices actually fell by 0.4% in April. That’s the largest monthly decline in the so-called core consumer price index since they began tracking the data in 1957. But even if falling prices sound like a good thing, deflation, the opposite of inflation, is very bad news.
When prices fall because people aren’t buying things, manufacturers sometimes can’t charge enough to make the product they’re trying to sell. That means they’ll stop making those products and lay off workers. That can start a vicious circle in which demand continues to fall as more people lose their jobs.
Deflation isn’t quite here yet and one month doesn’t make a trend. Prices have risen 0.3% over the past twelve months, but stay-at-home orders continue to plunge the economy into a massive downturn and lower prices could cause just enough damage to make it happen. Even worse, if retuning the economy to full capacity triggers new breakouts of the virus, we could wind up back to where we were in March and have to start all over again!
Clothes, Rent, Airfare, Cars, Oil, and All the Stuff You Buy
The jury is still out when it comes to what deflation and inflation course we may be on at the moment. It is too soon to judge what will happen on most items we buy and use. Airfares have been at all-time lows with 90% discounts one day and then back up to normal and even above-normal the next day as the airlines try to cope with “low” fuel prices and no customer demand to fly anywhere at any price. Stay tuned to see what will happen. As the economy opens back up again and demand and spending are in question, there is no telling what will happen to prices of anything. Even your rent charges may increase if the costs of maintaining rentals changes dramatically during the recovery from the coronavirus.
Most economists expect the coronavirus crisis to have a largely deflationary effect. The April data is proof of that. That’s bad news for policy makers at the Federal Reserve, who like to keep inflation at around 2.0%, the widely accepted ideal balance for the U.S. economy.
It seems that even as the economy reopens, core inflation is likely headed below 1.0% in the coming year in the face of potential high unemployment and low commodity prices. That’s mainly because the Fed has unleashed an enormous monetary policy stimulus package to stabilize markets and help the economy through this crisis. Ordinarily, monetary action like that would increase inflation, but not under these circumstances at this time.
Striking a balance between consumer needs and choices of health and safety are very stressful. The decisions we make in the near term will affect everything in the long term and that’s why we have to be very careful until we can stop the spread and find a treatment and vaccine.
Have you noticed the rising prices on groceries lately? Are you feeling safe returning to the workplace and resuming some or all of your normal life right now? What will you do and what choices will you make to insure your safety and yet be able to resume your life? Do you see the light at the end of this tunnel?