PracticalDad Price Index:  May 2014

Although this is being posted later than would normally happen, the pricing for the May 2014 PracticalDad Price Index occurred at the first of the month and the results were simply unexpected.  For all of the talk about incipient inflation – given credence by April 2014’s jump in the 37 item Food-Only Segment Index by greater than 1.5 points – the battle between Fed desired inflation and deflation continues as both of the indices declined again; this was led by Food-Only Segment Index literal collapse of greater than 2 points from April’s 113.59 to May’s 111.54 (November 2010 = 100).  The results are listed below:


PracticalDad Price Index – May 2014
Month Total Index (11/10 = 100) Food-Only Index (11/10 = 100) Spread
2/14 109.64 112.46 2.82
3/14 109.41 112.06 2.65
4/14 110.28 113.59 3.31
5/14 109.85 111.54









Most notable about this result is the sheer size of the index swing downwards – more than 2 full index points – and especially on the heels of the largest upward swing of 1.53 full points in the previous month.  If the marketbasket were a machine, I’d swear that the vibrations were increasing in such a manner as to damage it.

So for all of the talk about inflation, why the sharp move downwards?  Remember that deflation is symptomatic of a decline in the money supply as well as incomes and if the money supply is at all time highs, then prices are declining because the producers/retailers are having to drop them to help maintain sales; the Great Depression of 1929 was a situation in which businesses lost all control of their pricing because of a collapse in jobs and income. 

In May 2014, the index decline was again due to the price decreases in multiple food items at one store.  This same store has had greater than a half dozen food item price cuts since January 2014 and an additional three food items saw price declines as of the May pricing excursions.  

Let’s put this in perspective.  The PracticalDad Price Index marketbasket is composed of 47 common grocery store items, of which 37 are foodstuff products (for a complete list of the items in the marketbasket, see here).  Of the three constituent stores surveyed, one store has had price cuts in ten separate foodstuff products from the Index – more than a quarter of the food items – in the past five months.

There were certainly price increases in meat and dairy products as the cost of milk rose and the effects of the national beef herd culling rolls through to the consumer, but these factors were more than offset by the efforts of a grocer to stay afloat amidst a customer base that is cutting back spending because it’s being starved of income in the bifurcated American economy.

I’m waiting to see if and when this trend starts to hit the other two grocers.


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