PracticalDad Price Index: The Grocery Market Basket is Splitting as Food Prices Rise
The results of the June 2012 PracticalDad Price Index show that while the total market basket index declined slightly from May's 106.49 to June's 105.91 (November 2010 = 100), the food items portion actually rose significantly from May's 109.65 to June's 110.85. The upshot is that the cost of the total market basket rose by only 5.9% from November 2010 to June 2012, the actual food items themselves rose by 10.85%, a full 5% more.
In May, 2012, the reporting format of the PracticalDad Price Index changed as I began to calculate the index on both a full market-basket basis and a food-only market basket basis. There are 47 total items in the PracticalDad market basket and of these, 37 are actual foodstuffs with the remaining 10 being household, over-the-counter medication and personal hygiene products commonly purchased at grocery stores. All 47 items together comprise the total market basket index while the food-only index is based solely upon the 37 items.
When you sense that food costs are rising more rapidly than other costs, this is a datapoint which supports that notion. While the two indices moved in tandem from November 2010 to August 2011, it was in November 2011 that the prices for food themselves began to separate from the remainder; the activity amongst the non-food items masked the cost activity. From November 2011 to June 2012, the total index wandered in a narrow range from 105.56 to 105.91; during that same period, the food-only index rose consistently from November 2011's 106.38 to June's 110.85. In the three month period of February - May 2012, the food-only index increased by almost two full percentage points.
While there have been instances which supported the existence of stealth inflation, where prices are constant or drop slightly but package sizes decrease, June's pricing at three separate grocery stores found three instances of package changes:
- one grocery store continues to sell hot dog rolls in 8 count packages, but the weight of the package decreased from 12 to 11 ounces;
- another grocery chain joined its brand competitors by decreasing the Orange Juice packaging from 64 ounce cartons to 59 ounce cartons;
- the feminine pads are in the process of changing package sizing from 42 to 39 count cartons and this is in process as the local grocer still carries the old size package while the separate chains now carry the newer, smaller packages.
As before,the prices are adjusted to account for the stealth inflation.
So the next time you bite into that grilled hot dog and marvel at how it plump it is, there's a good chance that it actually isn't.
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