Food prices surged last month, climbing at the fastest pace in more than two years, even as overall inflation remained weak.
Sudden jumps in the prices of beef, pork, poultry and fish drove the price of food at grocery stores up half a percent last month, shocking retailers after months of near-zero price increases. The increase was offset by low energy prices, bringing year-over-year inflation to its lowest point in four months, consistent with recent monthly increases of .1 percent after adjustment for seasonal fluctuations in the Consumer Price Index.
Core inflation, which excludes volatile energy and food costs, remained at 1.6 percent compared to the same time last year. Inflation has been lower than the Federal Reserve’s target of two percent for 12 months.
“Nothing’s ever perfect, but this is far from perfect,” said Hugh Johnson, chairman of Hugh Johnson Advisors in Albany. “Low inflation is a problem.”
Chronically low inflation can be indicative of a weak economy, but sudden price jumps in individual consumer categories can also strain individual businesses. Unusually cold weather, reduced cattle herds after recent droughts and outbreaks of a virus that kills young pigs drove up food commodity prices in February, putting pressure on distributors and retailers.
“Food stores are pass-through businesses,” said Michael Rosen, president of the Food Industry Alliance of New York State. “They have to increase their retail price to maintain their one percent profit margin.”
Although customers are accustomed to some volatility in food prices, grocers tend to swallow part of short-term price increases, especially for foods like bread and milk that customers use to compare prices, said Rosen.
“It’s in the hopes of not giving them a sticker shock,” said Peter Castellana, a manager for Big Apple Meat Market in midtown. “It’s been rough – we’ll absorb small increases if something goes up for a week or two, but when it seems to be a little more long-term like it is now, we have no choice but to pass it along.”
Managers like Castellana evaluate the cost of their food items daily, finding the balance between changing food prices and sticker prices that ensure that their businesses can continue to pay rent, make payroll and cover their taxes.
“Before the CPI tells us what’s going on, believe me, I have a better feeling than they do,” said Castellana. “I see it every day.”
Frank and Eddie’s Meat Market in Bay Ridge, Brooklyn, is considering putting up signs to let its regular customers know that the sudden price increases are outside their control, said Evan Bobson, who works at the shop’s meat counter.
“The price is literally going up by the hour, every day,” said Bobson. “The customers are offended.”
Anna Maria, 44, said that she has started checking prices at multiple stores, even in different boroughs, to get the best deals. The price of food has gone up across the board, she said, but especially in the meat department.
“I used to buy chicken because it’s the cheapest one, but when you go now it’s not,” she said. “You try to save a dollar, two dollars, if you can.”
Last month’s food inflation is expected to continue into 2014, but the Fed’s expansion of the money supply through quantitative easing and rock-bottom interest rates has done little to prop up overall inflation rates. After a Federal Open Market Committee meeting earlier this week, the Fed indicated that tapering of its bond-buying program would continue. Interest rates would remain near zero for “a considerable time,” to push inflation closer to 2 percent, according to the statement.
In a press conference after the meeting, Fed Chair Janet Yellen said that the change would take place “on the order of around six months,” after tapering was complete. The Dow fell 114 points immediately after the comment as traders adjusted their bets for the possibility that rate hikes would take place two months sooner than expected.
Mikhail Melnik, an economist at Southern Polytechnic State, said that economic crises abroad have kept a lid on inflation in the United States, but high inflation is a possibility in a few years.
“Inflation is like wildfire,” he said. “Creating a wildfire is not difficult, but controlling it is impossible and a change in the wind might take it straight to your own house.”