Picking up Nickels

Wednesday, October 10, 2007

Grocery price inflation update

A recent CBS news story: Bulging Grocery Bills Fed By Global Forces, motivated me to do a little detective work and post an update to the increase in grocery prices that I discussed in January.

After examining the spending data that I track, I was surprised to see that our grocery spending through August 2007 has increased by 14.2% over the same period last year, which will equal approximately $800 more spent on groceries for the entire year if that trend continues. I have been noticing an overall decrease in aggressive sale prices, promotions, and "good" coupons out there, so an increase in spending wasn't completely unexpected. However, I was surprised to see that my 14.2% increase far exceeds the 4% "food inflation" claimed in the CBS news article.

The article also notes that wheat prices have increased by nearly 90% since the beginning of the year, and specifically mentions that General Mills shrunk cereal box sizes to effectively increase prices. Keeping that in mind, I headed out to do a little grocery shopping.

Donning my detective's cap, I found that the 14oz box of General Mills Honey Nut Cheerios at my local market had been replaced by a 12.5oz box for the same $2.99 price. That works out to a 8.9% price increase, which is a bit larger than the "small single-digit price" claimed in this Reuters article.
(note: the Reuters link above replaces one to a New York Times article circa 1995. Apologies for the bad data).

To add insult to injury, General Mills designed the 12.5oz box (below right) so that it appears to be larger on the shelf than the old 14oz box since the new packaging is taller and thinner than its predecessor:




So here we are in what is considered to be a period of low inflation, yet my costs for things like groceries, gasoline, heating oil, and medical care increase by double digit percentage points year over year. I think it's time that we re-evaluate our methods for measuring inflation, particularly when food and energy costs are disregarded because of their alleged volatility.

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2 Comments:

  • That is THE point. The powers that be DO NOT want the consumer to think about their declining standard of living caused by the outsourcing of labor overseas, and by the inflation caused by our federal government deficits....

    these deficits contribute to the shrinking dollar which is reflected in rising prices for oil and other communities.

    By Anonymous Anonymous, at 1/9/08, 7:01 PM  

  • I think you can point at many reasons for the rise in commodity prices, including high global demand, speculators, the terrorism premium, the ethanol effect, et. al. in addition to a weak dollar. I just think that the traditional measures of inflation are poppycock when compared to the price increases I've seen in my life for things like food, energy, and healthcare.

    I'm not sure what impact this has on "communities" though ;)

    By Blogger Frugal Frugalson, at 1/10/08, 10:10 AM  

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