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July 21st, 2009

UPDATE1 Are Food Prices Falling In Your Area?

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The BBC has been monitoring food prices around the globe for the past year in order to develop their World Food Price Index. The index records the price fluctuations of the five staple foods from seven cities around the world.

In the U.S., the BBC has been documenting the prices at Washington D.C.’s Safeway supermarket:

We look at the price of potatoes, eggs, meat, bread and milk, and we found that at this shop, at least, prices of these goods fell on average by 17% in the past year.

Since this is only one store in one city, we want to know if food prices are falling in your part of the country.

Prices are Flat or Falling for the Same Reason

That reason is the recession. Large supermarket chains have the ability to lower some of their prices more than smaller, more localized food stores. The ongoing recession in the U.S. is certainly one of the reasons prices are falling, since stores realize that the way to attract customers away from the competition is to lower their prices.

However, some stores haven’t lowered their prices simply because they can’t afford to:

[Tom Calamaris] runs a small fruit and vegetable stall at Eastern Market in Washington DC and says his business is really being squeezed by the big supermarkets bringing prices down – something he has not been able to afford to do.

“I just can’t do that,” he says, “I know a lot of the big businesses can because they make millions of dollars.”

Admitting he cannot compete, he warns, “Mama and Pop businesses go out of business because the big businesses swallow them up.”

Have food prices fallen in your area?

Update1: For more information on falling prices in the U.S., read the blog post “Things are getting cheaper: how and why?” from our friends at www.JustThrive.com.

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10 Responses to “UPDATE1 Are Food Prices Falling In Your Area?”

  1. Chris Says: July 20th, 2009 at 2:24 pm

    I shop at the low end (Wal-Mart) and the high end (Whole Foods). Prices were rising up to a couple of months ago. Now prices seem to have stabilized, but are definitely not falling.

    I wish I could say the same for my health insurance premiums. Just got a notice that my monthly premium will increase 7.5% in August. This is on top of a 40% (that’s forty percent) increase in February 2009.

    I have a history of the big C, so I can either pay it or drop it. No other carrier will consider me even though I have been healthy for years.

  2. Tim Manni Says: July 20th, 2009 at 2:56 pm

    Chris,

    Thanks for your research and input on the food prices.

    Hey, we’re real glad to hear that you’ve been healthy for some time now, let’s hope it stays that way! Wow what an increase! Why so much in one month?

    Considering your medical history, are you a supporter of President Obama’s health care reform? Do you think it would help or hurt someone in your situation?

    Great hearing from you again,
    Tim

  3. Chris Says: July 20th, 2009 at 6:08 pm

    Likely reasons for the continuing escalation of my health insurance premiums are that the company no longer writes new health insurance policies in my state, and my banana-republic-of-a-state is Louisiana, known for being last in every good category and first in every bad category.

    What difference does it make if the bills are paid through a private insurer or the federal government? The actors in the system, hospitals, doctors, home health providers, drug companies, etc., know how to scam the system as it is and will learn to do it again in any proposed system.

    The system is so out of control I don’t know what can rein it in.

    Did you see the excellent article in The New Yorker, June issue, “The Cost Conundrum,” by Atul Gawande?
    http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande?printable=true

  4. Lucia Says: July 20th, 2009 at 7:25 pm

    We buy groceries at a regional wholesale chain and prices have stablilized for several months generally at about 15% lower than last year. Milk, eggs, cheese, bananas, fresh salad makings are cheaper than last year, and meat has stopped rising. Pork and beef sales are more frequent than usual. I think prices have been lower due to reduction in food exports, but whatever the cause, it’s good for us especially since we buy bulk items on sale.

    Clothing and household goods seem to be stuck in sale mode. The classifieds are jammed with personal items for sale, increasing the competition for the retail stores. It’s amazing the deals for new vehicles these days. Too bad we can’t afford a payment.

  5. Tim Manni Says: July 21st, 2009 at 11:26 am

    Hey Chris,

    I did not read that article, but I will certainly check it out, thanks.

    Tim

  6. Tim Manni Says: July 21st, 2009 at 11:32 am

    Lucia,

    I agree that certain products are “stuck in sale mode,” and for that I’m grateful. I’m taking advantage of the lower prices where I can, but also, as you alluded to, there are great deals that I really wish Icould take advantage of, but financially I can’t. Specifically those are new cars and homes.

    Good hearing from you,
    Tim

  7. Lucia Says: July 23rd, 2009 at 1:48 pm

    When will all the price/wage declines constitute deflation?

  8. Tim Manni Says: July 24th, 2009 at 11:20 am

    Hey Lucia,

    Sorry it has taken me a day to get back to you. You asked a great question and I wanted to discuss it with HSH’s VP Keith Gumbinger. Here were a few points he made:

    While it’s true that some prices have declined — notably asset prices (real estate, equities, etc) — it would be hard to declare the present situation as outright deflation. The Fed has remained concerned about deflation getting hold of the economy, especially since the recession has spread to other nations, crushing demand. To that end, the Fed’s (and other central banks) extra-easy monetary policy is serving to address that problem, providing extraordinary levels of cash to various economies in order to help stimulate demand.

    If there was a deflationary period, it more likely is fading behind us, and or bet is that outright Japan-style deflation has been avoided. This is not to say that some prices (and wages) won’t continue to be pressured, because they will, and it is likely that businesses will have continue to have very weak pricing power for the foreseeable future, keeping inflation low (or contributing to what has been termed “disinflation”).

    Perhaps a greater concern is whether, after this period of falling prices for certain goods and services, the Federal Reserve and other central banks can mop up this extra liquidity before a new inflation bout is formed. Their record has been spotty in this regard, and there’s little certainty that they will be successful this time.

    I hope this was some help, thanks for commenting,
    Tim

  9. Lucia Says: July 24th, 2009 at 6:44 pm

    Thanks for the response. Disinflation is the term coined for the tight rope the economy walks between inflation and deflation? Bernanke seems confident he’s got what we need. I’ll be happy if we can still pay in dollars, or else I might have to spruce up my gold panning skills.

  10. Tim Manni Says: August 3rd, 2009 at 11:10 am

    Lucia,

    InvestorWords.com defines “disinflation” “as A drop in the inflation rate, i.e. a reduction in the rate at which prices rise.”

    Sorry I didn’t get back to you sooner, I was on vacation last week.

    -Tim

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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