More and more Americans are switching to generic brands or looking for discounts at the grocery store in response to sustained high food inflation, now running at 10.9 percent — the highest rate since the inflation-plagued late 1970s. Food prices continue to rise even though the overall U.S. inflation rate has slowed notably, said the Labor Department on Wednesday.
Prices surged 8.5 percent economy-wide in the 12 months ending in July, said the department in its Consumer Price Index report. Last month, the annual inflation rate was 9.1 percent. A dramatic drop in gasoline prices counterbalanced increases in food and housing costs in July.
It was the 14th month in a row that the annualized food inflation rate has increased, starting with a 2.2 percent rise in May 2021. Americans are adapting to higher food prices by bargain hunting at the grocery store and by eating fewer take-out or restaurant meals, according to a survey by Purdue University researchers. Weekly spending on food has been steady or rising slowly since May, an indication of belt-tightening.
The most common response — 28 percent — in the Purdue survey of 1,200 Americans on their responses to higher food prices was “sought out more sales and discounts.” Some 22 percent chose “switched to generic brands,” a 9-point increase since February. Five months ago, 31 percent said they had made “little or no change” in purchases because of higher prices; that number is now down to 22 percent. Somewhat larger proportions of respondents said they shopped at cheaper stores and bought fewer expensive or nonessential foods.
“Shopping [for] discounts and generics is a clear sign of budget consciousness among consumers,” said Purdue economist Jayson Lusk, who oversees the monthly Consumer Food Insights report. The relatively stable level of food spending “indicates consumers have become more concerned with ways to keep their grocery bills from rising any higher.”
When asked if they had eaten out as much as they would have liked this summer, 38 percent answered “less than I like” and 22 percent answered “much less than I like,” said the report. The combined majority “suggests people are having to make trade-offs. It is possible, however, that Americans would always prefer to eat out at restaurants more than they currently do.”
Food is the second-largest category of consumer spending, accounting for 13.4 cents of the consumer dollar. Housing is 32 cents of the dollar.
The so-called core inflation rate, which does not include food and energy costs, was 5.9 percent for the past 12 months. The core rate has declined slowly since reaching 6.5 percent in March.
“We’re seeing some signs that inflation may be beginning to moderate,” said President Biden. “Now, I want to be clear: With the global challenges we face from the war in Europe to disruption of supply chains and pandemic shutdowns in Asia, we — we could face additional headwinds in the months ahead. Our work is far from over.”
Biden said strong job growth and the unemployment rate of 3.5 percent showed the economy remained strong.
“Inflation remains painfully high,” said Mark Zandi, chief economist for Moody’s Analytics, on social media. “Inflation should moderate in coming months and return to the Fed’s inflation target by spring ’24. Of course, there are many threats to this inflation optimism, but today is a good day to be an inflation optimist.”