Whatever you’re spending on this year’s Memorial Day barbecue, you can expect next year’s to be even more expensive. The USDA forecasts that beef prices will rise between 5.5% and 6.5% 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 drought may cause price spikes in other foods foods – think broccoli, lettuce, bell peppers, almonds, and raisins – but it’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 its inflation target and the head of the Minneapolis Fed Narayana Kocherlakota thinks the Fed will keep missing its inflation target until 2018.
There isn’t, says Matt O’Brien, any reason to fear inflation. In fact, Paul Krugmanargued in 2012 that more inflation would help the economy. At the time, the Fed’s favored measure of inflation stood at 1.2%. It is now 1.2%.
Yet inflation feels like a problem to many people. The Guardian’s Greg Jericho 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. Derek Thompson pointed out that Americans spend a remarkably small amount of their income on food, just 11%. That’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 prices continues to widen 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. — Ben Walsh
On to today’s links:
The FT says it found data problems in “Capital in the 21st Century – FT
Piketty responds to the FT – Thomas Piketty
“For the moment, the FT’s strongest claims don’t seem all that clearly supported by their analysis” – Matt Yglesias