Consumer prices continue to rise amidst economic turbulence. Ongoing COVID complications, global supply chain issues, and an unresolved Russia-Ukraine conflict have all attributed to rising prices for the consumer to some degree. As many continue to anticipate further interest rate hikes by the Federal Reserve to combat inflation, retailers and foodservice establishments may experience a shift in consumer demand with rising prices.

According to the U.S. Bureau of Labor Statistics’ (BLS) most recent report, the Consumer Price Index (CPI) increased by 8.5 percent -- 8.6 percent when seasonally adjusted — in March 2022 compared to March 2021. On a month-to-month basis, the CPI increased 1.2 percent from February 2022 to March 2022. In February 2022, the CPI increased approximately 0.8 percent from January 2022.  

Rising energy and food prices have contributed a great deal to our economy’s current inflationary state. Gasoline and food prices increased nearly 48 percent and 8.8 percent year over year, respectively, in March 2022. Core inflation — inflation excluding food and energy prices — increased 6.4 percent year over year in March 2022 on a seasonally adjusted basis.

Food at home reached a double-digit year-over-year increase at 10 percent in March 2021 — the first increase of this magnitude since March 1981. At the same time, food away from home increased nearly 7 percent from March 2020 to March 2021—the largest year-over-year increase since December 1981. With respect to Meat, Poultry, Fish, and Eggs, consumer prices increased 13.7 percent year over year in March 2022—the largest increase since May 1979.

On the nominal level, retail prices have increased quite rapidly since the inception of the pandemic. According to the USDA, retail prices for chicken breasts, pork chops, and beef steaks in March 2022 were $3.87, $4.13, and $9.79 per pound, respectively. When adjusted to January 2018 price levels, prices of chicken breast and pork chops have remained relatively flat compared to beef steaks—which already look to be correcting downward.

Despite having the appearance of a correction, prices for beef steaks and many other proteins remain near all-time highs. This leads us to believe that demand remains relatively strong for many of these premium items. Since the inception of the pandemic, consumers have had more disposable income to spend on food as restrictions halted travel and entertainment. As inflation continues to pressure consumers on their willingness and ability to pay for goods, consumer demand will likely shift to less expensive options.  For retailers and foodservice establishments, it’s not a matter of if inflation will affect consumer decisions, but when.

Photo Credit: Lightspring / Shutterstock.com 

Andrei Rjedkin
Urner Barry
1-732-240-5330 ext 293
arjedkin@urnerbarry.com

Angel Rubio
Urner Barry
1-732-240-5330
arubio@urnerbarry.com

Akash Pandey
Urner Barry
1-732-240-5330
apandey@urnerbarry.com