Practical Dad

PracticalDad Price Index - May 2016:  Start Watching the Shelves

Deflation reigns.

The May installment of the PracticalDad Price Index is now ready, prices for the 47 item marketbasket gathered at three unrelated grocers, averaged and calculated.  The result?  Deflation continues as the Total Index dropped from April's level of 101.64 to a current level in May 2016 of 100.66 (November 2010 = 100), a decrease of almost a full basis point.  When I remove the ten non-food items, the remaining 37 item Food-Only Index did increase marginally from April's 101.40 to May's 101.60 (November 2010 = 100).  This month's Total Index drop was fueled by one grocer's decision to drop the cost of a package of Enfamil formula and another's decision to significantly drop the price of both adult and children's store-brand ibuprofen.  Magnify these types of decisions by the untold number of prices that are on the shelves of grocers across the United States and you have a sense of what's occurring.

There is another significant difference this month and that pertains to what I've noticed as to the inventory levels maintained by the grocers.  There have been occasional blurbs noted online - and I can't verify where I've read them - about what might be going on with the inventory levels at retailers as people might have noticed that clothing racks suddenly appear to be more widely spaced apart than they might have been in a previous visit several months before.  Because the PracticalDad Price Index is a monitor of grocery prices instead of inventory levels, I haven't paid explicit attention to what's happening with the product inventory.  It's something that I've begun to notice within the past years in a huh... fashion as shelves might appear to have fewer of the item in stock than previously or even missing it completely, leaving me to work with the shelving label.  But I was taken aback this month to see entire gaps in the frozen food section of one grocer as multiple products were missing in entirety from the case - and the shelves were still labelled for those products.  This observation raised a mental concern and that concern was confirmed when I visited another grocer to find a perceptible difference in the quantity of products on the shelves of the health/beauty aisle.  In this particular store, there was the typical variety of health/beauty products for sale but in far less quantity than I ever recalled seeing previously; there would be handful of an item but it would be set back against the back of the shelf and the front part of the shelf would be completely empty.  Magnify this across an entire spectrum of products in the health/beauty section and it appeared utterly barren.  When I continued through that particular store, I began to note other areas in which the product line appeared to be well-stocked but only because the amount on the shelves had been moved forward but there was very little behind it.  In other words, there was no product in depth on the shelving as I'd seen in previous months or years.

So what is the upshot?  As family incomes continue to decline and the middle-class American is stretched, this economic emaciation is beginning to move through the greater economy as grocers now appear to be far more actively culling their inventory levels to maintain their margins and profitability.  I've already noted that a grocer might opt to no longer carry a product because it simply isn't profitable - two of the three grocers no longer carry cases of size 3 store-brand diapers, for example - but this is now moving beyond the individual product choice to a broader spectrum.  So when you next walk through the aisles, looking at the shelves and have a huh... moment, there's a decent chance that it isn't just you.

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