PracticalDad Price Index:  Food Prices Accelerating in May


One of the infuriating aspects of the US Government’s CPI is that they use it for the basis for determining other things, such as benefit levels, while maintaining that food really isn’t a core component.  While this price index began in November 2010, I began in March 2012 to also calculate the index to show the activity of food prices within the marketbasket exclusive of non-food items (aluminum foil and Dial soap, for instance).

The additional calculation revealed that when non-food items are stripped away, food prices are accelerating at a greater pace; their activity is masked by the generally flat price activity of the non-food components.  Consequently, the February 2012 results showed that the cost of the original marketbasket had increased 4.9% (from 11/10’s 100 to 2/12’s 104.90) but the pricing of the food items alone had actually increased by 7.67% (from a food-only basis of 100 in 11/10 to a like basis of 107.67 in 2/12). 

The results of the May 2012 pricing to three unrelated grocery stores shows that the overall index again increased to 106.49, which matches the previous high of 106.49 in December 2011; this indicates that the actual cost of the 47 item marketbasket rose 6.49% in that 18 month period.  When food items alone are considered and evaluated on that basis, the food-only index comes in at 109.65 so that the prices of the food items alone have risen by 9.65% in that 18 month period. 

Notable points:

  • Stealth inflation struck again with a grocery chain now selling sugar in 4 pound bags instead of 5 pound bags.  As per procedure, I am recalculating the product to the original size to maintain consistency.  At some point, expect one or more of the other chains to do the same and the price of sugar to rise accordingly.
  • Of the 47 items in the marketbasket, 13 had price increases while 7 declined in price.  The largest increase was the price of a pound of roaster chicken, which rose 13.4% from April.

Comparison of Regular and Food-only Indices at three month intervals

Month            Regular Index            Food-only Index

11/10              100                             100

2/11                100.63                        100.46

5/11                102.08                        103.76

8/11                104.85                        106.52

11/11              105.56                        106.38

2/12                104.90                        107.67

5/12                106.49                        109.65


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