The November Consumer Price Index for Food-At-Home displays some of the volatility that encourages some economists to exclude food (and fuel) from measures of so-called “core inflation”.
The Bureau of Labor Statistics reports, “The food at home index rose 0.5 percent over the month. Four of the six major grocery store food group indexes increased in November. The index for meats, poultry, fish, and eggs rose 1.7 percent over the month, as the index for beef increased 3.1 percent and the index for eggs rose 8.2 percent. The nonalcoholic beverages index increased 1.5 percent in November, after rising 0.4 percent in October. The index for other food at home rose 0.1 percent over the month and the index for fruits and vegetables increased 0.2 percent. The cereals and bakery products index fell 1.1 percent in November, the largest 1-month decrease ever reported for the index which was first published in 1989. The index for dairy and related products declined 0.1 percent over the month.” In the chart below the behavior of overall food-at-home inflation is shown in blue.
For bakery prices to fall so fast while egg prices sprint higher is quite the trick.
As you’ve probably already guessed, egg production is down due to avian flu. CNBC reports, “Highly pathogenic avian influenza, better known as bird flu, has killed millions of chickens and reduced egg supply. Consumer egg demand is also highest around Thanksgiving and Christmas.” (More and more.)
The cause behind bakery price deflation is not as clear-cut. But — perhaps — what has happened is that this fall bakers have found their maximum price-points. Over the last three years bakery prices have increased by an average of one-fifth to one-fourth depending on what is counted (and who is counting). In the chart below bakery price trends are shown in red (egg prices are conflated with other proteins). October bakery sales were mixed with slow growth and lower comparative volumes — typically a sign of consumer price resistance. November price reductions were — it seems — an effort to increase demand levels. It will be interesting what the Personal Consumption Expenditures survey tells us about November’s direction of demand. Look back in two weeks.
Resilient supply chains rapidly adapt prices to changes in production capacity and demand capacity. The food supply chain is demonstrating cross-product resilience.
