Carpe Diem

Americans love to complain about rising food prices; here are three reasons they should stop whining

food2

It’s a favorite pastime in this country – Americans love to complain about rising food prices. Even when they aren’t. In fact, given all of the complaining you would never know that average food price inflation in recent years is actually the lowest in several generations. Below are three reasons that Americans should stop whining about food prices, and be a little more appreciative of how affordable food is in the US today, especially when compared to other countries, or when compared to previous decades in US history.

1. First all, food prices over the most recent 12 month period through July have risen by only 1.44% (see blue line in the chart above, CPI food data here), following 12-month increases of 1.38% in June, and 1.37% in May. Over the last 12 months starting last August, the annual food inflation rate has ranged between 1.37% and 2%, and averaged 1.6%.

Given the somewhat volatile history of food prices on a monthly basis, we can look at the average food inflation rate over a longer period of time to smooth out some of the volatility. The red line in the chart above shows the 48-month moving average of monthly food inflation rates. For the most recent 48-month period from August 2009 to July 2013, annual food inflation has averaged less than 2% (only 1.97%), and that’s been the case for the previous two months as well: 1.96% average annual food inflation for the 48 months through June, and 1.97% for the 48 months through May. As can be seen in the chart, there hasn’t been a period in more than 47 years, since early 1966, when the average food inflation over any 4-year period has been below 2%.

Bottom Line: Annual increases in food prices over the last four years have averaged less than 2%, which is the lowest average food inflation rate over a 48-month period in almost 50 years. Although it might seem like food prices have been rising faster recently than in the past due to either temporary increases in the prices of certain foods or because of short periods of price volatility, the average increase in food prices of less than 2% over the last four years is the lowest in several generations.

2. Next, let’s consider an international comparison of spending on food at home as a share of total consumer expenditures in 2012, based on data from the US Department of Agriculture for the 85 countries in the table below. As a share of total consumer expenditures per person last year, Americans spent the least amount on food consumed at home of the 85 countries analyzed by the government at only 6.6% ($2,273 was spent on average per person in the US for food at home out of $35,541 in total consumer spending last year per person). The average share of consumer spending for food at home was 22.8% for the 84 countries in the table below, and 33 countries spend one-quarter or more on food as a share to total spending, and 19 countries devote one-third or more of their spending on food. Consumers in many of the advanced economies of Europe and Asia (e.g. Norway, France, Japan, and Belgium) spend twice as much or more on food at home as a share of their total consumer expenditures as do American consumers.

Bottom Line: As a share of their total consumer expenditures, Americans were able to budget less of their spending on food prepared at home last year (6.6%) than consumers in any other country in the world (based on the USDA sample), who needed to devote an average of almost 23% of their annual consumer expenditures on food at home.

Country Share of Spending on Food, 2012 Spending on Food, Per Person Consumer Spending per Person
1. U.S.
6.6% $2,273 $34,541
2. Singapore 7.3% $1,422 $19,398
3. U.K. 9.1% $2,214 $24,260
4. Canada 9.6% $2,679 $27,761
5. Austria 10.1% $2,617 $25,908
6. Ireland 10.1% $2,037 $20,093
7. Australia 10.2% $3,814 $37,492
8. Germany 10.9% $2,481 $22,762
9.Switzerland 11.0% $4,943 $44,899
10. Denmark 11.1% $3,036 $27,306
11.Netherlands 11.6% $2,388 $20,625
12. Finland 12.0% $3,001 $24,927
13. Qatar 12.1% $1,361 $11,199
14. Sweden 12.2% $3,193 $26,146
15. S. Korea 12.2% $1,468 $12,002
16. Norway 13.2% $4,885 $37,146
17. France 13.2% $3,037 $22,945
18. Czech Rep. 13.3% $1,279 $9,643
19. Hong Kong 13.4% $3,224 $24,060
20. Taiwan 13.5% $1,657 $12,247
21. Japan 13.8% $3,818 $27,761
22. Belgium 13.8% $3,075 $22,208
23. Bahrain 13.9% $1,422 $10,200
24. Spain 14.0% $2,483 $17,713
25. Italy 14.2% $2,892 $20,362
26. U.A.E. 14.3% $3,024 $21,206
27. N. Zealand 14.6% $3,284 $22,448
28. Slovenia 15.3% $2,125 $13,858
29. Brazil 15.9% $1,123 $7,063
30. Israel 15.9% $2,783 $17,491
31. Hungary 16.2% $1,127 $6,972
32. Chile 16.2% $1,546 $9,566
33. Greece 16.5% $2,740 $16,652
34. Portugal 16.5% $2,225 $13,473
35. Slovakia 16.8% $1,603 $9,556
36. Uruguay 18.3% $1,878 $10,272
37. Colombia 18.4% $872 $4,744
38. Kuwait 18.6% $1,352 $7,284
39. Venezuela 18.6% $1,378 $7,421
40. Latvia 18.8% $1,619 $8,612
41. S. Africa 19.4% $877 $4,524
42. Malaysia 19.5% $1,084 $5,557
43. Poland 19.6% $1,521 $7,773
44. Estonia 19.6% $1,753 $8,923
45. Argentina 20.9% $1,381 $6,595
46. Bulgaria 21.2% $999 $4,718
47. Ecuador 21.9% $771 $3,526
48. Turkey 22.2% $1,708 $7,705
49. Costa Rica 23.3% $1,577 $6,754
50Turkmenistan 23.5% $589 $2,503
51. Dom. Rep. 24.5% $1,272 $5,192
52. Mexico 24.9% $1,625 $6,518
53. India 25.2% $220 $871
54. Iran 25.5% $699 $2,744
55. Lithuania 25.7% $2,331 $9,067
56. S. Arabia 25.8% $1,607 $6,220
57. China 26.9% $577 $2,149
58. Romania 28.6% $1,382 $4,827
59. Bolivia 28.7% $450 $1,567
60. Uzbekistan 31.0% $281 $908
61. Croatia 31.4% $2,847 $9,078
62.Bosnia-Herz. 31.4% $1,275 $4,057
63. Russia 31.6% $2,120 $6,709
64. Thailand 32.0% $1,016 $3,177
65. Jordan 32.2% $1,205 $3,743
66. Indonesia 33.4% $655 $1,964
67. Macedonia 34.4% $1,247 $3,626
68. Kazakhstan 35.1% $1,925 $5,483
69. Tunisia 35.5% $943 $2,660
70. Vietnam 35.9% $345 $962
71. Belarus 36.1% $1,115 $3,091
72. Peru 36.5% $1,507 $4,126
73. Ukraine 37.0% $1,028 $2,779
74. Guatemala 37.9% $1,091 $2,878
75. Nigeria 39.5% $381 $966
76. Georgia 40.4% $1,076 $2,663
77. Morocco 40.5% $777 $1,921
78. Azerbaijan 42.7% $1,222 $2,862
79. Egypt 42.7% $1,030 $2,410
80. Philippines 42.8% $823 $1,925
81. Algeria 43.7% $764 $1,749
82. Kenya 44.8% $350 $782
83. Cameroon 45.9% $423 $921
84. Pakistan 47.7% $415 $871

3. The chart below shows spending on food at home as a share of total consumer expenditures in the US, on annual basis back to 2012, using data from the Bureau of Economic Analysis. Over time, as food has become more affordable in America, consumers have needed to budget a decreasing share of their spending to eat at home, and the chart shows the decline over time, which has decreased from a range of 15-20% in the 1930s, 1940s and 1950s (comparable to Eastern European and South American countries today), to a range of 12-15% in the 1960s and 1970s (comparable to many European and Asian countries today), to a range of 7-12% in the 1980s and 1990s, and then below 7% since 2000.  During the period that some describe as the “golden era” of middle class prosperity and upward mobility, Americans spent more than 17% of their household budgets on food at home in each year of that decade, and as much as 18.5% in 1952 – almost three times the share spent on food today.

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Bottom Line: Average food inflation over the last 4-years in the US is the lowest in more than 47 years, Americans spend a smaller share of their household budget on food (at 6.6%) than consumers in any other country in the world, and that share of total US consumer expenditures spent on food has fallen consistently over time, and is now half of what it was in the 1970s and about one-third of what it was in the 1950s. Stop your whining.

49 thoughts on “Americans love to complain about rising food prices; here are three reasons they should stop whining

  1. It is relative to inflation in general. About three years ago, food was going up pretty significantly. I know they use substitution now if Filet Minion goes up, it isn’t inflation cuz folks will just start eating chub hamburger instead – so it was going up much faster than the government actually states – since the difference in quality of the substitution is not accounted for. I recall eggs doubling in price for instance, and all grains were going up pretty fast.

    But even I am full of it. According to your chart – if we didn’t use so much of our farmland to produce ethanol, we would be having food deflation right now.

    • By grains, I meant grain based products.

      The rise in food costs also started some of the Arabs springs that year as I recall as they started protesting higher food costs. – Something is wrong with the chart (I am guessing it is the substitution factor I was talking of. )

        • marque-

          exactly. you also get a similar effect when you sub in choice meat for prime.

          all the prime cuts have fallen out of the cpi food basket and been replaces by lower quality cuts of meat.

          how do we know they are lower quality? because the market tells us so. it prices prime fillet higher than choice filet. that’s about as objective as you can get.

          this is one of the big problems with CPI.

          the subjective adjustments made to much of it should offset.

          eg.

          CPI used geometric weighting to shift the product weightings in the baskets when prices change.

          thus, if the price of a prime roast rises, they underweight it and more heavily weight (or replace it entirely) with a choice grade roast.

          while this is a plausible consumer response to prices, it keeps CPI from being a real measure of the price level, instead making it a cost of living index. not the same tying at all.

          worse, this adjustment should be offset anyhow.

          cpi also used hedonic adjustments to remove the effect of quality changes.

          thus, a new ford focus may be determined (arbitrarily) to be 2% better than last year’s and this it’s price is adjusted for that, which is to say that if price stays the same, cpi registers it as a drop.

          leaving aside whether or not this is valid and or empirically demonstrable in any definitive sense, it does become clear that such a policy is largely incompatible with geometric weighting.

          a reduction in reported cpi from a change in weighting from prime to choice should be offset by the drop in quality of the meat (as demonstrated by market prices).

          the cpi, particularly around food, is an inconsistent application of the quality adjustments.

          it’s just a shell game.

          if you take a basket of either constant items or one adjusted for the drop in quality of food in the basket, you would get a considerably higher figure.

          • Morganovich, do you have any proof, or just more conspiracy theories?

            The BLS methodology looks completely unbiased to me, except the adjustments were too little and too late, which would overstate, not understate, inflation, over the past 30 years.

            The inflation data are supported by income, wages, and interest rates.

          • I guess, Morganovich believes the CPI failed to adjust for changes in the composition of cows, because there are now less prime cuts. So, inflation for steak is understated.

          • peak-

            more meaningless appeals to fake authority from you.

            as you have demonstrated over and over in past discussion, you do not even understand that the CPI methodology is, much less what it measures or how it works.

            these are just more “peak lies”.

            how could you even tell if it was unbiased? what, you are an expert on every product and know precisely what the quality adjustments should have been?

            this is a VERY simple concept here.

            changing basket weighting to shift from things that get more expensive to less expensive substitutes but not then accounting for the drop in quality understates actual inflation.

            changing the weighting alone make cpi not a measure of inflation, but a measure of cost of living and even then, it often has the wrong sign in its adjustments. it assumes that all price changes are demand driven. if a price change is because consumers are eating more meat and less pasta then the price in meat going up is due to a rise in consumption which means that the BLS is using a geometric weighting with the wrong sign.

            seriously, are you going to try to argue that if you switch from prime to choice steak it’s not a quality drop that should be included in the data?

        • “I guess, Morganovich believes the CPI failed to adjust for changes in the composition of cows, because there are now less prime cuts. So, inflation for steak is understated.”

          are you actually this ignorant or do you have to work at it?

          btw, it’s fewer prime cuts, not less.

    • Also you need to compare the food inflation against the average inflation to see if it is high or low compared to standard inflation. Would also be nice to see

  2. This is a good post but needs a graph on the very heavy subsidies that go to farmers and rural America. What you do not pay at the store you pay in taxes.

  3. geeze Benji – what a buzzkiller!

    It IS an interesting chart but I’ve come to not totally rely on CD charts as some have proven to misrepresent data or the meaning of data – at times.

    but something elsel that struck me was that Singapore is second on food but their total consumer spending is about 1/2 the US…. that’s ODD… given the rest of the OECD countries stats that are similar in proportion to the US.

    an even more amazing stat – NOT in the charts:

    Five years after the beginning of the recession, 20% of Americans struggled LAST MONTH to buy food

    • Yeah, it is strange. My salary and those of my friends has been going down over the last few years, we saw food inflation so bad a few years back, that it caused revolutions in countries, and the US was being asked to stop making so much ethanol. That year, price of eggs almost doubled, and the price of most grain based foods seemed to go up 25%. But granted an increase of 5% that year as show in the chart when all other inflation was close to zero is still fairly significant. But I believe the government has distorted the CPI so much over the last 20 years that it is almost worthless. And you definitely can’t compare into the 1970′s like the chart implies because it is calculated significantly differently.

      I remember about 2 years ago several articles coming out talking about how inflation may be 2.5% today, but if it were calculated in a similar fashion to the 1970′s it would be closer to 10%.

      They put in things like computers and TV’s to help calm the inflation figure, but ignore the fact that the TV’s don’t just cost less, they are worth less as well. And then they do substitution. assuming folks will use other things so an expensive apple can just be swapped for an orange, if apple prices are going up but oranges are stable.
      It has become zany.

      Yeah grandma, if you are so upset about prices, stop buying those expensive drugs and purchase a few television sets.

      • If inflation was 10% a year after the 1970s, then real income, and real wages, would’ve been shrinking so fast, each year, your standard of living would be a fraction of what it was in the 1970s.

        However, we know living standards, along with labor and environmental standards, are much higher today than in the 1970s. It’s much more likely inflation has been overstated, than understated, since the 1970s.

      • Note that an outdated computer or TV, even if purchased “new” should be treated like a used car, with limited remaining life, rather than a new item since the old technology computer won’t be useful for nearly as long as the mainstream technology computer, and therefore the value of the computer hasn’t really reduced the CPI, you are just now substituting a lesser good as well.

  4. I think, people forget, or never understood, the U.S. had a long and powerful economic boom from 1982-07 on top of the Fed preventing a deep depression, similar to the 1930s and 1870s, in a long wave bust cycle, in the 1970s.

    The U.S. has been the main engine of economic growth, pulling the rest of the world’s economies. We’ve seen, when the U.S. catches a cold, the rest of the world catches pneumonia.

  5. Would like to understand the chart better – there appears to be some inconsistencies that don’t pass the ho-ho test which are probably tied to the methodological use to develop them. But just assume that it is correct it is mind blowing that about half the world’s population spends 1/3 of their earnings on staying fed. Hard to get my head around that number, maybe that is one of the many reasons folks come to America.

  6. Wouldn’t a large part of the trending decrease in spending for food at home be from the increase of spending for food away from home (Table 10 USDA: from 25% in 1954 to 48.7% in 2011 food away from home as a share of total food dollars). I didn’t see a table for how other countries split their food dollars between at home and away from home to compare that.

      • the irony is that a baloney sandwich in a brown bag is just as fast and probably cheaper than “fast food”.

        and of course at some point, most folks actually do cook a supper – and it’s super easier to cook an additional burger to brown bag/microwave later… without even have to “fast food” it.

        • Nope your brown bag isn’t as fast and cheap as fast food.

          First I have to go the grocery store. Then I have to search the store and find the baloney, the bread, and the brown bags. Then cary it to the register. Then I wait and wait for the clerk to finally get to me. Then I have to pay for it. Then cary it back out of the store and to my home. At home I then have to store it in the ice box which not only costs money to run but takes up valuable space in my house. Then on the day I intend to eat the baloney sandwich, I have to take it out and prepare it and bag it. Then I have to remember in the morning rush to take it with me to work where it again must be stored in the ice box that the company provides (which they could be paying me more instead of wasting money on that crap). Then finally I eat it if there isn’t some compelling alternative.

          There’s a high likelihood of it being forgotten in the morning and being runied. Or not actually eaten b/c there are better and cheaper alteratives presented at lunch-time, so again it sits and goes to waste.

          Brown bagging isn’t at all cheaper, faster, or less wasteful.

          • So, if you go to the store and buy enough for 10 sandwiches (along with other items, like milk) and make them, the time allocated to buy and make the 10 sandwiches may be less than an hour.

            However, driving to McDonalds 10 times, waiting at the drive-through, to buy fatty and greasy hamburgers and french fries, may take longer.

            You may wait five minutes for a TV dinner, but how long to drive to and from a restaurant, order, and wait for a dinner? Even ordering and waiting for a pizza takes a lot longer.

          • I just stocked-up on various boxes of cereal on sale for $2 each. I won’t be buying cereal for at least six months.

        • I will give you that it is about as fast. But I find if I do a real accounting, I am not really getting anything for less. If my home made meal is less, it is because I am providing myself less in the way of calories somehow. And that Baloney is 50% saturated fat! You would be healthier eating the burger.

          I find most people don’t save nearly as much as they think. Once exception, if you or your spouse tend to overcook dinner, and the leftovers are going to get thrown out. You may as well take them to work – that would represent a savings over waste.

          Note that like in the movie Fathead (which you can watch for free on Hulu) I actually lost weight last month eating mostly at Fast Food restaurants, and I don’t think my bill was that much higher than if I cooked at home. It is an interesting phenomena.

          • My wife and I ate 3 meals a day and way too many snacks for $9.72 a day average each from Aug 2012 to Aug 2013 food at home (our food away from home was $1.07 a day each). It’s difficult to match the nutrition we received at home for about $3.00 a meal eating away from home.

    • Walt, Singapore is rated at the second lowest in food expenditures, BUT while living there you may want to prepare your own meals. According to one expatriate website:

      “If you cook at home, your average monthly personal food costs should come up to only about S$200 per person for basic meat and vegetables. For a couple eating out, average monthly food cost can range around S$1,000 – S$1,200 depending on their eating choices.”

      Currency conversion: 1 USD = 1.27031 SGD.

      • “…. Singapore…food costs should come up to only about S$200 per person for basic meat and vegetables. For a couple eating out, average monthly food cost can range around S$1,000 – S$1,200 depending on their eating choices.”

        what’s different about Singapore than other OECD countries in terms of proportional cost of home vs restaurant/fast food? a higher consumption tax?

  7. Walt

    Wouldn’t a large part of the trending decrease in spending for food at home be from the increase of spending for food away from home…

    Yes, absolutely. And that’s an indication that people value alternate uses of their time more than ever before, compared to time spent preparing food at home.

    • exactly.

      if dining out patterns change (and they have) then “food at home” is not really a great gauge of overall food costs.

      it would be interesting to see that graph for food away from home.

        • peak-

          you really are a mathematical illiterate.

          the figure was % of consumption spent on on food at home.

          food away from home is a substitute for food at home.

          thus, if people eat out more, that number drops even if food prices at home rise. it’s not the simple measure you seem to think it is. many things could drive a drop.

          for a guy who claims to have grad level econ you sure seem to struggle with junior high math.

          • So, you disagree food at home (prices rising less than 2% a year) is not a great gauge of food at home?

          • peak-

            seriously, how can anyone be this bad at basic math and statistsics?

            you are not even using the correct terms and you are trying to change the issue under discussion while assuming your premise.

            the graph mark posted is expenditures on food at home as a percentage of income. that is what we were talking about.

            you do realize that food away from home is a substitute for food at home, right?

            as more americans more to cities, the percentage of food away from home is likely to rise.

            thus, you CANNOT know if prices for food at home are going up or down based just on the % of overall income until you also know what is happening to the percentage of meals eaten at home.

            let’s take a very simple example.

            let’s say you earn $100 weekly and spend $1 a meal on 21 meals a week all of which you eat at home.

            thus, you spend 21% of your income on food at home.

            now let’s say that the cost of a meal at home rises to $1.20 per meal but that you start eating out 7 times a week.

            so now you spend $16.80 on meals at home, less that 17% of your income.

            but prices are up 20%.

            so that is not a sign of reduced cost, it’s a sign of changing where you eat.

            food at home prices in cpi are similarly prolematic as if food away from home goes up as a % of consumption, then it becomes less relevant as an overall cost.

            then you try to assume your premise by holding up the same cpi for food at home that we have shown to understate inflation as a gauge of inflation. the big drop in food prices is a result of changing methodology, not stable prices in food markets.

            there seems to be no end to your dishonest tactics.

    • Ron, while I prepare food at home I can earn money using my computer to fulfill a contract as the food cooks (I will be earning some money after this post). When we go out, it is all idle time waiting to be seated, deciding what to eat, and waiting on the server to serve the food and driving to and from the restaurant to get it (we don’t normally do fast food).

      It is an interesting concept of quantifying our daily time spent on tasks using dollars because when it comes down to it, time is the only thing of value we really have.

      • Walt

        We each value our time differently. Thank God for that.

        For some folks, me included, going out to eat is a social experience spent meeting and dining with other people. I value this leisure time more than the time and/or money I save preparing a meal at home. It isn’t just about putting something in my stomach.

        While you are making productive use of your time while your food cooks, I’m spending time chatting with friends while mine cooks. All value is relative.

  8. So who should I believe; the bureaucrats or my lying eyes? Anyone who buys food at the supermarket knows food prices are up and not just by 4%. So unemployment is “only” 7.8% and food inflation is less the 4% and could even be 0%… Bwahahahahaha!

  9. Actually your chart shows a very substantial acceleration of food price inflation in 2007-2010, and a gradual decline since then. That’s what people have been complaining about. It’s not surprising that people are slow to stop complaining as inflation slows. Only in the past year has food price inflation been low.

    As for whether Americans have any right to complain given their relative affluence compared to the rest of the world, that’s a different point. Maybe we don’t, but somehow I don’t think that’s going to stop people.

          • It’s a state by state decision. This source says California, Arizona, Florida and Michigan allow it.

            I guess what I’m trying to articulate is that those households who consume the USDA “nutritional” food basket have seen prices rise faster than the CPI basket which may explain part of the inflation angst about CPI understating the rise in food at home prices.

          • Marmico – yes.. on board with your thinking/reasoning on basic nutritional foodstuffs vs CPI.

            Speaking of USDA, perhaps not well recognized is that there is a certain amount of food passed out directly by USDA.

            USDA Food Distribution

            not sure if or how that might be accounted for…..

  10. 1. Using a CPI number means that a constant basket is not used.

    2. Of what import is the statistic “food expenditure at home”? I’m almost certain that the U.S. has the largest percentage “food expenditure at drive-thrus” as well. What would that imply regarding food inflation? Nothing I would venture.

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