Get ready for higher grocery bills for the rest of the year
Shoppers had better start budgeting more for their groceries, according to the latest consumer price index, which shows prices are increasing — and they're likely to keep going up.
The monthly consumer price index, released Tuesday morning by the Bureau of Labor Statistics, showed a 0.6 percent increase in March, the largest one-month increase in nearly a decade. Over the past year, prices have increased by 2.6 percent overall.
Gas skyrocketed by 9.1 percent last month. Since February, prices of fruits and vegetables have risen by nearly 2 percent, and the index for meats, poultry, fish and eggs has risen by 0.4 percent, according to the government figures.
The spike comes on the back of prices that had already risen during last year's pandemic stockpiling and supply chain disruptions and never went down. Consumers are noticing their inflating receipts.
Outside a supermarket in Long Island, New York, John Kermaj said he has seen prices rise in just the past two months.
"We used to buy this stuff for $30. Now it's $60," he said.
He has tried to adapt when shopping for his family by buying only essential items and avoiding name brands, but that means skipping meat and fresh fish.
"Gotta be the pandemic," Kermaj said. "Shortage."
Before the pandemic began, the national average for a pound of bacon in January 2020 was $4.72. By last month, the price had soared to $5.11, according to exclusive supermarket point of sale data from NielsenIQ. Ground beef is up to $5.26 a pound, from $5.02. Bread is up to $2.66 a loaf, from $2.44.
The hikes are more acute in certain areas. Boston and Philadelphia are paying nearly a dollar more per pound of bacon, while in Chicago it is up by about 70 cents. Several items spiked by over 5 percent at once in Dallas, including eggs, chicken breast, fresh ground beef and sandwich bread.
Changes at the checkout are also pressuring grocery profit margins. Manufacturers have cut back on promotions and coupons to moderate demand since the stock-up period in March last year.
"In a typical month, 31.5 percent of units are sold on promotion; in the most recent period of March, 28.6 percent of units were sold on promotion," Phil Tedesco, vice president for retail intelligent analytics at NielsenIQ, said in an email. "This has led to shoppers having fewer opportunities to take advantage of sales in the store," increasing total costs.
Economists say costs from rising gas prices, a spike in commodity prices, increased imports by China, heavy Midwest crop damage and other factors are all getting passed on to retail consumers.
"Supply chains are largely inefficient at this time," said Isaac Olvera, agricultural economist for ArrowStream, a supply chain management software company. "We're still dealing with fallout from the pandemic."
Gas prices and transportation costs that get passed on to consumers, especially for items like bread, are only going up as driving increases faster than oil production. So grocery prices are likely to remain on the higher end of estimates for at least the rest of the year, Olvera said. Producers may eventually increase their output to capture the heightened demand, but that won't happen until toward the end of the year, Olvera said.