Practical Dad

PracticalDad Price Index - September 2016:  The Potemkin Village Shelves

Another month of pricing for the PracticalDad Price Index is finished and the results for September, 2016 are calculated.  The Total Index, comprising the full 47 item market-basket, declined in September to 98.28 from August's 100.19, a full 1.91 basis points (November 2010 = 100).  The 37 item Food-only Sub-Index, comprising the 37 foodstuff items within the basket, dropped even more significantly from August; the September Sub-Index was 97.26, down 2.48 basis points from August's index of 99.74 (November 2010 = 100).  This is one of the largest swings in either direction in the almost six year history of the PracticalDad Price Index.

Here's a little perspective.  I began the Index in November 2010, in the midst of the Fed's QE2 Program and both Index and Sub-Index climbed until they peaked in January 2015 (111.32) and December 2014 (115.13) respectively.  This was shortly after QE3 ended in late October 2014.  It took more than four years to induce these apogees but without the stimulus provided by the Fed's programs however, deflation has ground away and the both Indices have literally collapsed.  The cost of the full market-basket was actually less in June 2016 than at the outset of the project and the food-stuffs segment likewise reached that point in July 2016, a month later.

One of the things that I've noticed while pricing for the past several months has been the quantity of items on the shelves and by extension, the condition of the grocery supply chain.  This is in terms both of the seeming appearance of more widely spaced shelves and also the periodic disappearance of items from the shelves completely.  It's not like the photos of desolate shelves pre-hurricane or even the absolute disappearance of product a la 2016 Venezuela, but it's little things.  A particular item will be gone for a month or two - not just unstocked but with even the shelf label gone - only to reappear later; in multiple instances, the item has not only returned but been supplemented by an even lower-cost alternative, what economists refer to as an inferior good.  When this has shown to be consistent in the subsequent months, I have have made note and replaced the store-brand with the inferior item in the index pricing.  Also noticed has been wider shelf spacing between products in particular grocery departments (health and beauty, cereal, hot dog cases).  If you're willing to make the effort, check occasionally for empty space behind the front two rows of products, which might have been moved forward to the very front of the shelf to make it appear more well-stocked.  This Potemkin-Village effect is a wonderful metaphor for what's become of the American economy as the media touts the stock market but the large majority of Americans grow poorer.  But it was a recent article about the effects of deflation upon the grocery supply chain at zerohedge that confirmed what I've noticed.  As prices have collapsed, the entities at the various levels throughout the supply chain are scrambling to adjust and companies are either surviving or dying and it's the indications of this that are being exhibited subtly in the grocery aisles.

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