Even as prices rise more slowly, many inflation-stressed grocery shoppers are bargain hunting this holiday season.
Setting the table on the cheap won’t easy, according to data from the Bureau of Labor Statistics.
Inflation measures show food prices are far more stable than they were last year for most staples, said Randy Fortenbery, an agricultural economics professor at Washington State University. It’s an improvement many shoppers won’t be feeling.
“Prices are still increasing,” Fortenbery said.
“They’re not rising as fast as they were before,” he continued, “so we’re still going to see some challenges especially for lower-income families and their food basket.”
For example, the price of this year’s Thanksgiving meal, touted to be cheaper than last year, was driven almost entirely by the drop in turkey prices, Fortenbery pointed out.
Relative to a year ago, the Consumer Price Index, measuring the average change in prices over time for consumer goods and services, shows the growth rate of turkey prices slowed by more than half. Wholesale prices dropped even further.
“Turkey prices hit record highs last year because of avian influenza — that was an unexpected disease that wiped out our turkeys, cut supplies and drove prices high,” said David P. Anderson, an agricultural economist at Texas A&M University, specializing in livestock and food product marketing. “This year number of turkeys produced bounded to record highs and now we’re seeing the positive effects with lower prices.”
The slowdown in price growth for turkeys reflects the wider economic trend of slowing inflation, which continued this December. The average retail price for a whole turkey is $2.49 per pound in stores in the Northwest according to the latest data from the U.S. Department of Agriculture. However it won’t make this year’s holiday meal cheaper.
“Everything else was still higher, so if you go into Christmas and families are looking at hams instead of turkeys, then prices will be significantly higher than they were a year ago,” Anderson said.
In fact, the price of ham is up by more than 5% from 2022, peaking this October.
Roast beef is up more than 12% from a year ago, peaking in November as supplies continued to tighten.
Meats aside, a holiday meal this year also costs more as prices of other ingredients have risen. Sauces and gravies are up 8% from last year, bakery products are up 4%, and sweets and sugar now cost nearly 6% more.
To prepare a holiday feast, shoppers look at their pantries and refrigerators to assess what ingredients they need to buy or replenish. Grocery stores may cut prices on those meaty mains to draw customers, betting that shoppers will pay full price when they stock up on sides and staples.
“The retailer wants you to be in their store, not somebody else’s store to do that,” said Michael Swanson, chief agricultural economist at Wells Fargo.
“So they think maybe I’ll sell you turkey at a loss because by the time you throw in the rest of your shopping list, I’ll make a lot of good business around that list,” Swanson continued.
For holiday side dishes, the prices of fresh fruits and vegetables have dropped while prices of canned and frozen produce have risen.
“Fresh fruits and vegetables are having a much better year this year than a year ago,” said Swanson, adding that these prices are generally volatile depending on the harvest season.
Better rates for refrigerated trucks transporting fruits and vegetables in the 2023 holiday season are also lowering prices.
Last November, the national average rate for refrigerated truck traffic was $3.80 a mile; this year it is $3.30 a mile. “That 50-cents-a-mile drop is a big piece of what we pay as the consumer to get it from that packing house in Mexico or California to New York, Boston or Seattle,” Swanson said.
Meanwhile a recent supply shortage of packaging materials may still be pressuring prices on some canned goods, Swanson said.
“Tin and steel, two key components for cans, have gone up and [what] we see on the shelf today, reflects the shortage six months ago or 12 months ago when they were canning or processing,” he said.
It will take time for consumers to feel the effects of slowing inflation at the grocery store.
“There’s a delayed reaction at the consumer level to what happens at the production level,” said Fortenbery. “So any decline in those inflation indices is going to be positive for consumers eventually but it doesn’t always happen immediately.”
“It takes a little while to work through the system and if you look across the consumer’s basket, we see a lot of variation depending on the commodities that you’re looking at,” Swanson said.
From October to November, real earnings increased by 0.2%, more than the Consumer Price Index increase of 0.1%.
“It’s a very tricky topic because if somebody hasn’t gotten a pay raise themselves recently they’ll scoff at the idea that wages are higher,” Swanson said.
These wage increases were mostly negotiated or awarded in the higher inflation period of several months to a year ago, said Fortenbery, adding that if inflation continues to slow down then wage increases will eventually slacken as well.
If inflation lays low for a while as wages grow, though, consumers may be able to feel the effects of slowing prices.
“We were losing purchasing power before,” said Fortenbery. “This may allow us to catch up.”
“In general, we’re seeing better ability to purchase — whether people feel good about it, is a completely different topic,” said Swanson, adding, “It takes a while for the new prices to become the ‘normal’ prices.”
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