Mike von Massow
Does Food Inflation Matter More than Other Inflation?
Food prices are going up. We've seen food inflation in the past year - Statistics Canada estimates that food prices have gone up an average of almost 4% from October 2020 to October 2021. Some categories have gone up more than that. What's more, food prices will likely continue to go up over the next year due to a number of factors including supply chain issues and extreme weather (including droughts) driven by climate change. We are currently hearing a lot about inflation in the broader economy but it seems that we get more upset when food prices rise. This raises the question as to whether food price inflation matters more or if we are just more sensitive to it. The truth is likely that it is a bit of both.
It's obvious that food is important for us. We literally can't live without it. In North America, we spend approximately 10% of our income on food. That proportion is higher for those with lower incomes. When prices rise it affects our budgets immediately. While we can and do "trade down" somewhat, food price increases generally mean increased expenditures on food and less money available for other things. The food insecure who pay a larger portion of their income to food have less buffer in their budget and get squeezed into buying less food or less healthy food and become more food insecure. We can't delay the purchase of new food (as we might for a computer or a car). Food price increases affect us immediately and are tough to avoid.
We Buy Food More Frequently
The frequency of food shopping varies between households but most purchase food at least once a week. We have a strong expectation of what things will cost based on very recent experience. We are much quicker to notice the changes in food prices because of this frequency. I know the price of cars has gone up in the past year - Statistics Canada says they increased more than 6% - but haven't really noticed because I am not shopping for a car. We know that housing prices are going up but again, unless you are buying a house or changing apartments, you might not be directly impacted and not notice the change. Gasoline is a product that is similar to food in its purchase frequency (for some at least) and we often get just as excited when those prices increase.
Food Prices Vary More
If you look at historical data, there is more variability within years than between years. There is some natural seasonal variability. There are also individual circumstances that can lead to short term price increases - remember $10 cauliflower as one example. We respond quickly to these price jumps and they make for great news. This brings awareness to the issue but also increases our sensitivity to food price increases. Individual price increases may also increase our perception that prices are increasing.
The reality remains that food prices are going up. It is also true that this will hit Canadians in the pocketbook and worsen food insecurity. Food inflation does matter more than price increases in some other categories. We are, however, also more likely to notice and complain about it than we are for other sources of inflation.
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Recommended citation format: von Massow, Michael. "Does Food Inflation Matter More than Other Inflation?". Food Focus Guelph (120), Department of Food, Agricultural and Resource Economics, University of Guelph, December 8, 2021.