Practical Dad

PracticalDad Price Index:  Splitting Out Food Items from the Marketbasket

The March 2012 PracticalDad Price Index is complete and the results show that while there's been a slight rise from February's result of 104.90 to March's 105.26 (November 2010 = 100), this is still below the December 2011 peak of 106.49.  In real terms, the cost of the 47 item marketbasket is now 5.26% higher than the index inception in November 2010.

What's most notable about the March result is that the price of a pound of 80% lean ground meat has jumped by 10% to $4.14.  Nothing else stands out except for peanut butter, which continues it's rise and is now actually rationed in certain stores.

There's been an ongoing debate about whether the present economic environment is inflationary or deflationary, with the focus on the most commonly viewed aspect of prices.  The data thus far has shown that the market basket peaked in December, 2011 and the subsequent index readings would support a deflationary conclusion.  But given the most recent commentary about an uptick in prices, this didn't jibe with what I've seen.  Consequently, I re-examined the data and re-calculated the indices - with the same data - at three month intervals but only for actual food items.  The market basket is 47 items, but these include non-food products such as diapers, bath soap and household/beauty products. 

Month/Year               Regular Index               Food-only Index (recalculated)

11/10                         100                               100

02/11                         100.63                          100.46

05/11                         102.08                          103.76

08/11                         104.85                          106.52

11/11                         105.56                          106.38

02/12                         104.90                          107.67

The upshot is that when the non-food items are stripped out of the basket, the food categories (bread, cereal, dairy, grocery, meat, produce and staples) are actually rising and at an increasingly higher rate than non-food categories.  As money is continually injected into the system, it's making the way into the commodities and food arenas with a correspondingly greater effect. 

 

 

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