PracticalDad Price Index:  Comments On Pricing Food

It’s been five months since I began to track prices on a specific marketbasket of items, and even longer since we began to hear about the return of inflation.  There are some things that I’ve noted since the process began, including some thoughts while on my hands and knees checking the unit prices on the bottom shelve of the stores.

  • Listening to commentators and bloggers – whether you agree with their views or not – you suspect that the onset of inflation will occur like a financial tsunami that washes our collective savings out to sea.  The reality is that the onset of inflation is considerably more insidious and if you aren’t paying attention, then you might not be able to verify that it’s happening.  Wait, didn’t I pay less last month for this?  I think so, but there’s no receipt to check.  When the individual items are shown with prices over time, then you can see that some items do increase over time while others are motionless and still others wander over the margins like a drunken sailor. 
  • You begin to see how individual grocery stores and retail chains are managing with what they’re presented.  In one instance – formula – I started with the same product at all three stores but after a price spurt at one store, that particular management apparently decided that the product was too expensive to stock for their customers and removed it from the shelves.  I consequently now price that formula at only two stores instead of the original three.  Likewise, grocery chains quietly downsize the product packaging before they move forward and actually rise the prices; coffee is a case in point as two of the three stores downsized the product and it was only in March that a significant price hike was passed through to the consumer.
  • Pricing decisions also reflect the actions of the purchasing managers who might somehow get a better deal for that particular month so that the price of the item has actually dropped.  There have been multiple occasions when I’ve revisited a store two or even three times to verify that I didn’t foul up and write the wrong data.  This isn’t to say that there haven’t been mistakes, but simply that the motion isn”t always upwards.
  • How can I describe the sense from pricing explicit items over time and watching their activity?  Honestly, it’s struck me as though I’m on a beach and aware that the tide is going to come in.  I maintain a position, but to help my sense, place sticks at specific positions in the sand to both my left and my right.  As I observe, I can see that as a wave washes ashore, one marker will be overrun while its neighbors remain dry.  This continues with the immediate waves never quite washing up in the same place but over the course of time, individual sticks are increasingly overwhelmed by water while others might remain less underwater, a function of whatever factor I can’t know.  And if you aren’t paying attention because you’re playing with the kids, you suddenly realize that the waves are approaching the towels and scramble to keep things from ruination.  It’s happened but you can’t really say how or when.
  • What economists – and bloggers – will say is that inflation is not only a monetary phenomenon, but also a psychological one as well.  The effect of the psychology is to change the behavior to account for the situation at hand and the case study for this was the Weimar Hyperinflation of post First World War Germany, when the middle class was left destitute.  Why save when what you get is going to be worth nothing in the next week or even day?  That isn’t to say that this is what will occur because honestly,  no one can be certain.  But the across-the-board increases that people expect will create that kind of psychology, even if it’s "only" 10 or 15% annually.

The PracticalDad Price Index will continue and I plan to pass the data along to someone who has a better sense of how it might be analyzed.  The kinks have been largely worked out by now and this can serve as a small indicator of what’s happening to us as we live our lives.



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