I am sure you have been to the grocery store lately (unless you shop for groceries online [1]). We shop for groceries every other week, and my husband was the last person to go so I hadn’t been to a store for a month until last weekend; boy was I surprised! Our grocery bill has increased by about $20 every other week from just a few months ago. That is $40 for our two person household; how much has your grocery bill increased per month?
The Consumer Price Index (CPI) [2] is one way that is used to measure inflation as it concerns American consumers. It measures changes in the pricing of a basket of goods and services over a period of time. The products and services are representative of what Americans consume, and the most recent ones have been chosen from the Consumer Expenditure Surveys for 2007 and 2008 (7,000 families recorded their quarterly consumption during these surveys). There are over 200 categories, including transportation, food and beverage, and recreation. The CPI is measured for two groups of consumers: Urban Consumers and Urban Wage Earners and Clerical Workers.
Increase in Prices
From March 2010 to March 2011, the ‘All Items’ category increased in cost. Food and gasoline spending accounted for three quarters of this increase, which is probably not a surprise to you.
In particular, gasoline prices have risen 27.5% from March 2010 to March 2011.
The category ‘Food At Home’ (aka the food you purchase at a grocery store) rose 3.6% in price from March 2010 to March 2011. Of that 3.6%, the highest price increases since February 2011 were:
- Vegetables: 4.7% (specifically tomatoes, lettuce, and potatoes)
- Coffee: 3.5%
- Margarine: 3.9%
- Salad dressing: 3.1%
Now may be the time to look into 11 Ways to Save Money on Groceries [3].
You can see data for the most recent month in the economic news release [4] which is updated monthly.
How this Could Impact Future Policy
Beyond prices at the grocery store and the gas station, the Consumer Price Index is also used as an economic indicator in a number of ways, and a substantial increase to prices could impact future government policy. The CPI is used to determine:
- Cost of living adjustments (COLAs) for social security [5], federal, and military retirees; recipients have not seen an increase in benefits for the past two years (the last increase was 5.8% in 2008 [6]).
- Federal income tax brackets [7], personal standard deductions, and exemptions are all based off the CPI as well, and if prices continue to rise throughout 2011 these could change.
- The CPI is the reason for the increase in New I-Bond Rates at 4.6% [8].
In addition, IRS mileage rates [9] are “based on an annual study of the fixed and variable costs of operating an automobile.” Since the CPI measures gasoline prices, it’s probable that the study will correlate with increases in the CPI as an indicator for the variable costs.
How have rising prices impacted your household? Which items seem to be more expensive to you?