The rise of food prices is critical to the upcoming presidential election in November. Food prices are measured in the Consumer Price Index (CPI), a crucial measure to determine inflation levels and general health of the economy. When inflation is high, consumers lose purchasing power and are forced to spend more on necessities like food. It will be interesting to see how Joe Biden and Donald Trump can convince voters how they will help the economy cool down.
For the average U.S. household, trips to the grocery store happen three times a week. Recently, grocery stores reflect an economy still dealing with the impacts of the COVID-19 pandemic. Many Americans are affected by inflation most consistently in grocery stores because of the necessity of food and the frequency with which people go to the store. As Ross Steinman, a professor who studies consumer behavior at Widener University, says, the “sheer frequency of grocery trips makes price increases harder to swallow [1].” Joe Biden and Donald Trump will have to confront issues affecting consumers surrounding the economy and high inflation in their upcoming presidential campaigns. High grocery prices will be a topic of discussion and important for voters.
Various factors contribute to high grocery prices, affecting inflation and the economy. Labor shortages from the pandemic, supply chain problems, droughts, and the avian flu have kept grocery prices high. At the start of the pandemic, supply shortages combined with an increase in demand for groceries increased prices. Fruits and vegetables are affected by droughts and severe weather, limiting supply. Chicken and egg prices have risen after an outbreak of the avian flu, or bird flu, in the country. The demand for groceries remains higher than before the pandemic, and U.S. consumers strain their budgets when shopping for groceries due to a variety of these factors. Consumer purchasing power is diminished by high prices, which affects general consumer confidence in the economy [1].
The Consumer Price Index (CPI) is a basic measure to detect inflation because it records the average change in prices of consumer goods and services. In a report of the March CPI data released by the U.S. Bureau of Labor Statistics on April 10, 2024, the basket of all items recorded in the CPI grew 3.5% from last year [2]. Grocery prices are higher when compared with overall inflation, especially when looking at growth since the COVID-19 pandemic.
Over the past four years since the pandemic, grocery prices have jumped 25%, yet, overall inflation has only increased 20% in the same time [3]. Income stays sticky as inflation fluctuates, so the increase in prices is felt by consumers who have reduced purchasing power. The rise in prices, especially grocery prices, can influence how good or bad consumers feel about the economy.
CPI is also an important indicator for the Federal Reserve as they consider where to set the Federal Funds Rate. The Federal Funds Rate is the target interest rate for which “commercial banks borrow and lend their excess reserves to each other [4].” The Fed can raise and lower rates to influence the economy and consumer spending. A higher rate incentivizes saving and reduces the money supply in the economy, while a lower rate increases spending and the money supply. The Fed funds rate currently sits between 5.25% and 5.5% [4]. The Fed has a tentative plan to lower rates by the summer months, but they have to be careful. When the Fed lowers rates, the increased money supply can contribute to inflation and rising prices. Since inflation is still elevated, as seen in the recent CPI data, the Fed is cautious about cutting rates, which might increase inflation even more. Blerina Uruci, chief U.S. economist at T. Rowe Price, says CPI from March is “a stronger-than-expected number,” noting how it will be hard to cut rates in June as predicted because inflation is not going down [5].
Inflation levels and grocery prices will likely be an important factor for voters when they cast their ballots in November. Food prices are at the forefront of consumers’ minds because of the frequency and necessity of grocery shopping. A large amount of a consumer’s income is spent on food. With high inflation comes decreased consumer purchasing power, so worries about food prices are at the top of people’s minds.
An FMI survey found that seven in ten consumers are “very or extremely concerned about the cost of groceries [3]." Low-income families are even more impacted, spending 31% of their income on food, while weather families only spend 8% [1]. With food prices remaining high, many people want to know how a presidential candidate will help solve their worries about inflation and the economy.
In the 2024 November election, prices and the economy will be the focus of many votes. A survey of approximately 5,000 swing-state residents found 83% said the economy is “very important” in the upcoming election. Of those surveyed, 49% believe “Bidenomics,” Biden’s campaign to strengthen the economy and lower inflation, is bad for the economy. Biden has passed three legislative pieces that support “Bidenomics,” the bipartisan infrastructure law, the Inflation Reduction Act, and the CHIPS and Science Act [6]. The economy under Trump’s presidency was relatively good, other than the recession as a result of the global pandemic. As the two candidates face off in the upcoming election, Biden’s economy is often compared with Trump’s [7].
The present inflationary environment is largely due to the pandemic, and Biden stepped into office while the economy was still recovering. Regardless of his culpability, voters still see Biden as responsible for current economic conditions. Jim Tankersley from the New York Times notes, “Mr. Biden has been banking on cooling inflation — and ensuing rate cuts — to lift his re-election prospects [8]." It’s clear voters are wary of the effectiveness of Biden’s approach and are reminiscent of Trump’s old economy. The prices of groceries in the upcoming months will have an impact on consumer confidence and will be crucial in how voters cast their ballots come November.
All content is the intellectual property of the Virginia Undergraduate Business Review.
REFERENCES
1] Bhattarai, A., & Stein, J. (2024, February 2). Inflation has fallen. Why are groceries still so expensive? https://www.washingtonpost.com/business/2024/02/02/grocery-price-inflation-biden/
[2] U.S. Bureau of Labor Statistics. (2024, April 10). Consumer price index - March 2024. https://www.bls.gov/news.release/pdf/cpi.pdf
[3] Sasso, M., Shanker, D., Kang, J., & Jamrisko, M. (2024, March 17). Grocery prices have soared. That's spoiling Biden's economic pitch. https://www.bloomberg.com/news/articles/2024-03-17/grocery-prices-are-up-25-in-four-years-that-s-hurting-biden-s-economic-pitch?embedded-checkout=true
[4] Chen, J. (2024, February 1). Federal Funds Rate: What it is, how it's determined, and why it's important. Investopedia. https://www.investopedia.com/terms/federalfundsrate.asp#:~:text=The%20federal%20funds%20rate%20is%20used%20by%20the%20Fed%20to,of%20the%20Federal%20Reserve%20System
[5] Smialek, J. (2024, April 10). Inflation was hotter than expected in March, unwelcome news for the Fed. The New York Times. https://www.nytimes.com/2024/04/10/business/cpi-inflation-fed.html?nl=breaking-news®i_id=79239549&segment_id=163087
[6] Mejía, E., Haque, J., & Lu, D. (2023, October 27). How 2024 swing-state voters feel about the US economy — in 10 charts. Bloomberg. https://www.bloomberg.com/graphics/2024-us-election-key-state-voter-polling/october-2023-poll/?embedded-checkout=true
[7] Narea, N. (2024, March 12). Biden's vs. Trump's economy, in 8 charts. Vox. https://www.vox.com/politics/24094752/biden-trump-strong-economy-2024-inflation
[8] Tankersley, J. (2024, April 10). A hot inflation report is a blow to President Biden. The New York Times. https://www.nytimes.com/2024/04/10/business/Biden-inflation-cpi.html
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