Piper Sandler, managing director and senior economist, weighs in on Fed Chairman Jerome Powell’s comments on interest rate cuts, discusses consumer spending, and reacts to unemployment claims numbers.
Economic reports continue to show that inflation is falling from painful peaks in recent years. But the high prices many Americans still face at grocery stores remain a top concern for voters.
Government officials have been touting data showing annual inflation has fallen to 2.4% from a 40-year high of 7% in June 2022, even though prices for daily necessities have fallen to 2.4% in June 2022. Americans who remember what they paid are less relieved.
“Wages will continue to rise and inflation will continue to fall,” Biden declared in Thursday’s State of the Union address.
“Inflation has fallen from 9% to 3%, the lowest level in the world, and is trending lower still,” he said.
Food prices have soared more than 21% since the start of 2021, and while prices for some items have fallen from their peaks, there is little expectation that prices will fall to previous levels.
The Fed chairman said, “The prices of some things are going to fall, and the prices of other things are going to rise.However, we don’t expect a decline in the overall price level.The situation in the economy is not very negative.” As long as that doesn’t happen,” he said. Jerome Powell said this in an interview on “60 Minutes” in February. “If you think about basic necessities like bread, milk, eggs, different types of meat, looking back, prices are significantly higher than before the pandemic.”
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A customer buys milk at a grocery store in San Anselmo, California. (Justin Sullivan/Getty Images/Getty Images)
When Americans complain about inflation, the first thing that comes to mind is their grocery bill. More than two-thirds of voters say rising food prices have been hit hardest by inflation, the report found. A survey has been published This is more than 50 percent higher than other categories such as gas, transportation, and housing.
Price data from the U.S. Bureau of Labor Statistics shows why shoppers are right to be concerned. Examining just his two common items on the grocery list, eggs and milk, reveals a significant price increase from January 2021 to January 2024.
Beginning and Progress: Egg
The average price of 12 Grade A eggs in the United States increased by 52.6% from $1.27 in January 2021 to $2.52 in January 2024. (FOX News/Fox News)
In January 2021, the average price for 12 Grade A eggs in U.S. cities was $1.47. Four years later, its price has increased by 52.6%, and the average price per dozen is $2.52.
Meanwhile, in January 2023, the retail price of 12 eggs soared to $4.82.
“I think consumers have probably noticed that egg prices have been on a bit of a roller coaster ride over the last year, and that’s due to a number of factors,” said the president and CEO of the American Egg Board, a checkoff organization. said Emily Metz, CEO. It advertises “incredibly edible eggs.”
In addition to continuing supply chain issues from the pandemic, Metz said the avian influenza outbreak has devastated poultry producers, significantly reducing egg supplies in 2022 and 2023. He explained.
Last year, the majority of Americans made sacrifices to cover their monthly bills.
Egg prices from January 2021 to January 2024. (FOX News/Fox News)
“We just have fewer hens laying eggs. So it’s a supply and demand thing. We’re struggling with that a little bit. Our farmers have responded as best they can.” Metts told FOX Business.
He said egg producers are price makers and the retail prices consumers see at grocery stores are highly dependent on market forces of supply and demand.
“As many of you know, the price of many things other than food is going up right now, so the packaging of the feed the chickens eat, the labor on the farm, the care of the chickens, everything goes up. It’s more expensive,” Metz said. “These costs can impact the final cost of the eggs.”
Looking ahead, Metz said there is reason to expect costs to come down as supply chains normalize after coronavirus-related disruptions. But even at an average price of $2.50 per 12 eggs, eggs are arguably the most affordable protein available on the market, and one of the most nutritious proteins. she observed.
“If you calculate a serving of two eggs, it’s less than 40 cents,” Metz said.
Compare this to the price of sirloin steak, which was $9.15 per pound in January 2021. It currently averages $11.64 per pound.
Beginning and Progress: Milk
The average price per gallon of liquid whole milk in the United States increased from $3.47 per gallon in January 2021 to $3.96 per gallon in January 2024. (FOX News/Fox News)
Milk is also a major household product. Three years ago, in January 2021, the average cost of whole milk in U.S. cities was $3.47 per gallon.
As of January 2024, prices have increased 13.2% to $3.96 per gallon.
“Dairy products have seen a slightly slower rise in retail prices than other products,” said Peter Vitaliano, chief economist at the National Milk Producers Federation.
Since the average price of a gallon of milk peaked at $4.22 in November 2022, prices have steadily declined while the overall price of all food and beverages continues to rise, Vitaliano said. He pointed out that
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This chart shows the average price for a gallon of fresh whole milk from January 2021 to January 2024. (FOX News/Fox News)
He explained that the retail price a consumer pays consists of two parts: the cost of that gallon of raw milk and the farm-to-retail cost. Although raw milk prices have been fairly stable over the years, except for a brief period in 2022 when they were very high, the farm-to-retail portion has remained high, pushing up milk prices.
“Supermarkets are very reluctant to change prices when costs rise, but once prices rise to a certain point they have no choice but to raise prices. ‘Their food costs go down,’ Vitaliano said.
“But milk is a very competitive business. They can’t keep it up forever. So retailers are trying to keep some of that higher price, but perhaps more importantly, This is the farm-to-retail part of milk, which has increased in price due to general inflation.”
The costs driving up the price of milk include labor, transportation, energy, packaging, and feed costs.
Why are groceries still so expensive?
“The trends in what’s happened with feed prices are having a big impact on the prices that farmers pay, and that prices are reflected in what fluid milk processors pay,” Vitaliano said.
As of January 2017, the cost of feed to produce a gallon of milk on a farm averages just under $1, and the margin a farmer receives over that cost to produce a gallon of milk is about $1.25. was. A federal program exists that pays farmers when the margin between milk and feed prices falls below $1.10 per gallon, a measure of a dairy producer’s financial health.
By August 2021, feed prices had risen to nearly $1.50 and profit margins had fallen to just $0.57, leaving farmers in severe financial distress. Vitaliano said milk production was down that year, but demand was consistent, pushing milk prices to record highs.
Although feed prices have since fallen, farmers are now earning only about $1 per gallon of milk, still below the $1.10 threshold, he added.
For a product like milk, the retail price is closely related to the cost of production. What future prices will be will continue to depend on overall inflation and feed prices, but Vitaliano predicted prices will continue to fall as farms grow larger and more efficient.
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Biden accused companies of “increasing prices to inflate profits and charging more and more at lower and lower rates.”
“That’s why we’re cracking down on companies that engage in price gouging and deceptive pricing in everything from food to health care to housing,” he said.
FOX Business’ Megan Henney and Bradford Betz contributed to this report.
