ANALYSIS | Want to fight grocery price gouging and inflation? Do your duty and shop around | CBC News (2023)

FAQs

How do you beat inflation and save on groceries? ›

While food prices generally increased about 2% in prior years, they increased about 11% from 2021 to 2022. Inflation contributed to the increase. But there were other factors—like global disruptions to the food supply chain—that may have had a greater impact. And not everyone felt this increase the same way.

Food prices are projected to rise in 2023, albeit at a slower pace than they did in 2022, according to the USDA.

Contractionary monetary policy is now a more popular method of controlling inflation. The goal of a contractionary policy is to reduce the money supply within an economy by increasing interest rates. 5 This helps slow economic growth by making credit more expensive, which reduces consumer and business spending.

Chicken and eggs

A dozen grade A eggs cost, on average, $4.25 in December—making it the grocery stable with the largest year-over-year price increase.

Why grocery stocks hedge against inflation. For two reasons, grocery stocks tend to fare better than most other stocks. First, regardless of what happens in the economy, people need to eat. Because food is a necessity, the higher costs of groceries from inflation can easily pass on to the consumer.

High inflation rates mean consumers' purchasing power decreases, resulting in less consumer spending and lower business sales. This, in turn, can create excess inventory, dead stock, and therefore lost revenue for your business.

How does the government control food prices? ›

Federal agencies don't control food prices, but may indirectly affect them. For example, by relaxing regulations to let food made for restaurants be diverted to grocery stores, the FDA helped to avert food shortages that could've further increased prices during the COVID-19 pandemic.

It was a bad year for food shortages in 2022, with categories including eggs and baby formula hit hard. Unfortunately, 2023 could see its own batches of food shortages. Here's what consumers should start stocking up on now before prices soar and products likely become harder to find on store shelves.

Economists agree that supply chain issues are a major driver of the price hikes we've been seeing. In the food industry especially, transportation disruptions due to the pandemic and higher grain prices have made a significant impact.

The "slowing economy is likely to bring the yearly inflation rate down to around 4.0 percent by the end of 2023," Kiplinger predicted.

Managers should consider these three strategic options, especially if inflation persists: recalibrate and clean up the product portfolio, reposition the brand, or replace the price model. These options are not mutually exclusive, so managers could also pursue a combination of them.

Commodities like gold, oil, and even soybeans should increase in price along with the finished products that are made with them. Inflation-indexed bonds and Treasury Inflation-Protected Securities (TIPS), tend to increase their returns with inflationary pressures.

Does inflation help or hurt consumers? ›

In an inflationary environment, unevenly rising prices inevitably reduce the purchasing power of some consumers, and this erosion of real income is the single biggest cost of inflation. Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates.

Rising Inflation Means Consumers Will Buy Less Overall

Many consumers are tightening their purse strings in response to the rising cost of living.

Higher prices across the board can deter potential consumers from buying from their usual stores. Recent studies have shown that 76% of buyers are spending less money. Entertainment and clothing are the main areas where consumers are cutting costs, prioritizing more essential needs.

Inflation Erodes Purchasing Power

This is inflation's primary and most pervasive effect. An overall rise in prices over time reduces the purchasing power of consumers since a fixed amount of money will afford progressively less consumption.

Inflation can impact the price of everything you need for daily living, from food to housing to what it costs to fill your tank so you can drive to work or put clothes on your back.

A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product. Some companies reap the rewards of inflation if they can charge more for their products as a result of the high demand for their goods.

All Americans should have at least a three-day supply of food and water stored in their homes, with at least one gallon of water per person per day.

Those lead to rising energy prices, rising transportation costs, rising labor costs. On average, 16 cents out of every dollar spent on food can be tied back to the farm. Everything else, the vast majority, has to do with things like processing cost, transportation, the wholesale and the retail trade.

According to many reports, the current situation with food supplies is, in fact, already dire. The WFP predicts that by 2023 there will be a shortage of wheat and corn, which are two staple products in the food supply chain.

What does the average U.S. household spend on groceries per month? According to 2021 data from the Bureau of Labor Statistics, which is the most recent available, the average spending on food at home is $5,259 annually, or about $438 per month for U.S. households.

Who controls the price of food? ›

Price controls are normally mandated by the government in the free market. They are usually implemented as a means of direct economic intervention to manage the affordability of certain goods and services, including rent, gasoline, and food.

Regulatory Agencies. The USDA was started under Lincoln in 1862. There are two main agencies that regulate food in the U.S; the Food and Drug Administration (FDA) and the United States Department of Agriculture (USDA.) Both are charged with overall food safety nationwide.

Facing higher prices, workers demand higher wages. That fuels further inflation. In extreme cases, it can trigger what's known as a wage-price spiral, in which higher pay and higher costs become a loop unmoored from what's happening in the larger economy.

Other policies to reduce inflation can include tight fiscal policy (higher tax), supply-side policies, wage control, appreciation in the exchange rate and control of the money supply. (a form of monetary policy).

Canned foods, pet food and beer may be in short supply due to a widespread aluminum shortage. Lettuce crops and orange groves were affected by plant viruses. One major producer of lettuce lost 80% of their crop in 2022.

Food shortages 2023: Carrots, leeks and cabbages could run low in weeks as supermarkets ration | The Independent.

Buying in bulk

You can save on groceries during inflation by buying household products in bulk at warehouse stores like Costco and Sam's Club. These memberships come with an upfront cost, but you'll lower your per-unit cost. And buying in bulk can help you make fewer trips to the grocery store.

Inflation is so high because many consumers are spending more money than they usually do, and because supply chain issues and global fuel shortages have lingered since the pandemic. That high demand and low supply have led to an increase in prices.

Why are eggs expensive right now? ›

Egg prices have skyrocketed because of a widespread outbreak of H5N1, a highly transmissible and fatal strain of avian influenza, or bird flu. This outbreak started in early 2022 and has grown into the largest bird flu outbreak in U.S. history.

Almost two-thirds of chief economists believe a global recession is likely in 2023; of which 18% consider it extremely likely – more than twice as many as in the previous survey conducted in September 2022. A third of respondents consider a global recession to be unlikely this year.

Many economists believe the strategy will trigger a recession this year. But the NABE forecasters expect the economy to grow 0.8% in 2023 – based on the change in average GDP over the four quarters compared with 2022. That is down from 2.1% last year but up from their 0.5% estimate in December.

Inflation has not affected all food equally, though. Pantry staples that have stayed below the average increase include potatoes, cheese, tea, tomatoes, pasta, bread, ice cream, and fresh, processed, and frozen vegetables. On the opposite end, price increases for steak and bacon remain in the double digits.

Economists agree that supply chain issues are a major driver of the price hikes we've been seeing. In the food industry especially, transportation disruptions due to the pandemic and higher grain prices have made a significant impact.

Inflation is putting the fast food industry in a weird spot. Chains face rising costs for labor and ingredients, which are forcing them to raise prices. But at the same time, inflation puts consumers in the mood for value meals — even if “value” is a relative term.

The Fed has several tools it traditionally uses to tame inflation. It usually uses open market operations (OMO), the federal funds rate, and the discount rate in tandem. It rarely changes the reserve requirement.

What sells more during inflation? ›

Commodities like gold, oil, and even soybeans should increase in price along with the finished products that are made with them. Inflation-indexed bonds and Treasury Inflation-Protected Securities (TIPS), tend to increase their returns with inflationary pressures.

Ben Johnson, Chief Operating Officer of Kapitus, says, “We expect inflation to remain above the Fed's 2% target rate throughout 2023… [and] we do expect the Fed's action to ultimately succeed in slowing the economy and reducing inflation rates, especially in the second half of the year.”

Canned foods, pet food and beer may be in short supply due to a widespread aluminum shortage. Lettuce crops and orange groves were affected by plant viruses. One major producer of lettuce lost 80% of their crop in 2022.