Whatever you’re spending on this year’s Memorial Day barbecue, you can expect next yearâ€™s to be even more expensive. TheÂ USDA forecastsÂ that beef prices will rise betweenÂ 5.5% and 6.5%Â by the end of 2014, after already increasing just under 10% so far this year. Overall food prices are projected to rise at between 2.5% and 3.5%.
Blame droughts in California, Texas, and Oklahoma for the rise in the cost of meat. TheCalifornia droughtÂ may cause price spikes in other foods foods â€“ think broccoli, lettuce, bell peppers, almonds, and raisins â€“ but itâ€™s unlikely to noticeably alter current projections for broad food price inflation.
The odd thing about rising US food prices is that inflation elsewhere is very, very low. The Fed keeps missing itsÂ inflation targetÂ and the head of the Minneapolis Fed Narayana Kocherlakota thinks the Fed will keep missing its inflation targetÂ until 2018.
There isnâ€™t,Â says Matt Oâ€™Brien, any reason to fear inflation. In fact,Â Paul Krugmanargued in 2012 that more inflation would help the economy. At the time, the Fedâ€™s favored measure of inflation stoodÂ at 1.2%. It isÂ now 1.2%.
Yet inflation feels like a problem to many people.Â The Guardianâ€™s Greg JerichoÂ thinks we are simply not very good at aggregating and averaging the price increases and decreases in the dozens and dozens of purchases we make. Instead, we tend to focus on a few noticeable price increases and overlook sometimes substantial price drops.
And even if food prices do continue rise in the US, they will be rising from a very low floor.Â Derek ThompsonÂ pointed out that Americans spend a remarkably small amount of their income on food, just 11%. Thatâ€™s a dramatic fall from 1950, when we spent 30%, and 1900, when a now unfathomable 42% of the average household budget went to buying food. The gap between overall consumption growth and food pricesÂ continues to widenÂ for all but the poorest families.
Even if it feels a little more expensive, most Americans are getting a pretty good deal on their burgers. â€”Â Ben Walsh
On to todayâ€™s links:
The FT says it found data problems in “Capital in the 21st Century -Â FT
Piketty responds to the FT -Â Thomas Piketty
“For the moment, the FT’s strongest claims don’t seem all that clearly supported by their analysis” -Â Matt Yglesias