7 surprising facts about food prices
For the first time in years, people are now spending more money eating out than on groceries for food at home.
Many people believe that Americans waste a bunch of money eating out — that avocado toast and lattes are budget wreckers, for example — and that’s sort of true.
In 2014, an important line was crossed — for the first time since the government tracked this sort of thing, families spent more eating out than eating at home.
But when you really look into the numbers about the way Americans spend money on food, a far more complex picture emerges. Like many other typical household purchases — such as refrigerators or clothes — many food items are actually much cheaper than they were a generation ago. And overall, food isn’t nearly the budget-busting line item it used to be.
In fact, according to government statistics, U.S. families are spending much LESS overall on food than they did a generation or two ago. Food now eats up about half as much of the family budget than it once did.
Even that fact is a good news/bad news story, however, according to Annemarie Kuhns, a food economist at the U.S. Department of Agriculture. Part of the reason food consumers less of household spending is because housing costs and health care consumes so much more.
“It really depends on the food you are purchasing,” Kuhns said. “Processed food is less expensive, but fresh fruits and vegetables are much more expensive.”
To get a better picture of what’s really going on with your budget, here are some surprising facts about food spending. As you read them, remember, it’s always easy to find an anecdote or two that confirms a belief you might have — most of us have a friend who complains about not being able to afford a home, but does indeed indulge in avocado toast regularly. That’s just an anecdote, however, a narrow view of things. To really understand the issue, you have to look at the broader picture.
Food is generally getting more expensive
First off, you aren’t crazy. Your grocery bill keeps getting bigger — and the cost of food is rising faster than most things. From 2012-2016, food prices rose 6.1%, but the overall consumer price index rose only 4.5%. NOTE: That’s bad, but it’s less than the 9.5% rise in housing costs and 11.7% increase in medical care costs. This is a long-term trend, too. The USDA says grocery store prices are up 4.5% faster than economy-wide prices during the past 30 years.
Continued trouble at fast-casual chains seems to confirm that finding. Restaurant analyst TDn2K says that overall, restaurant same-store sales have now fallen for five straight quarters, and traffic fell more than 3% in the first quarter of this year, compared to the prior year.
Food is cheaper this year
Last year, for the first time in nearly 50 years, so-called “food-at-home” prices dropped. The USDA says retail food fell 1.3%. Some items fell far more. The price of eggs, for example, dropped almost 20% in a year, thanks to lingering impacts of the avian flu. That’s good news for you, but bad news for grocery stores, and we’ve seen plenty of them punished on Wall Street as a result. Kroger, the nation’s largest supermarket chain, said in March that its same-store sales had fallen 0.7% during the end of 2016.
We are eating out a lot more
Economists call eating out “food away from home” — as opposed to food-at-home — and it’s true that Americans are spending more while eating out than ever. This has something to do with the state of the economy: During the 2007-2009 recession, food away from home share fell, for example.
Don’t be so quick to judge this consumer behavior, however. It’s true that many Americans don’t take the time to cook anymore, but rising restaurant prices are partly to blame, also. Higher food-away-from-home prices mean more overall spending, whether or not people spend more nights at restaurants. And there’s some indication American’s love affair with certain kinds of restaurants has ended. Back in 2014 — the same year Americans eating at home fell into second place in the BLS data – NPD Group said the average American dined at a restaurant 74 times annually, the lowest reading in more than 30 years.
Food isn’t the budget killer you might think
Overall, food consumes a lot less of a family’s earnings than it did back in the 1960s, or even the 1980s. Between 1960 and 2007, the share of disposable personal income spent on total food by Americans, on average, fell from 17.5% to 9.6%, driven by a declining share of income spent on food at home.
This seems hard to believe, but it’s true, says Kuhns.
“You have to think of it in terms of relative vs. nominal terms,” she said. “It’s one of those things where prices go up each year, but so does income.”
The share of income spent on total food began to flatten in 2000, however — partly because food prices began to rise, and partly because incomes have stagnated.
In the end, if you are still convinced that Americans eating out too much is the cause of many personal finance problems, consider this: The Agriculture Department says that in 2014, Americans spent 4.3% of their disposable personal incomes on food away from home. That’s not a budget buster.
Food is a budget killer for the poor, however
The richer you are, the less you care about the price of food, for obvious reasons — but more critically, the less your monthly budget is subject to shocks from rising food prices.
In 2015, middle-income households spent 12.4% of their income on food, while families in the lowest one-fifth of income spent fully one-third of their money on food. That’s a stunning gap, and makes poorer families very sensitive to sudden increases in the price of essentials like milk or bread.
We sound a bit like whiners
One might conclude that those who complain about rising food prices in the past decade or so have forgotten history. Even in a bad, recent year (2008), food rose about 6%. Back in the 1970s, double-digit increases were typical. In 1973, food prices rose 16.4%, and then in 1974, another 14.9%. Those increases were blamed on food commodity and energy price shocks, and the larger economy saw shocking inflation, too.
Eggs are now a bargain and butter is cheaper, too
It can be hard to compare the price of items across the decades, but there are ways. For example, a look at a 1971 Sears catalog shows a basic refrigerator cost $399, or about $2,450 in today’s dollars. That would buy you a heck of a refrigerator today.
Another useful method is to compare the increase in costs over time, which the BLS does. A fascinating chart compares the cost of items back in 1913 vs. 2013. Butter was once the most expensive item in a consumer’s grocery sack. Now, coffee, steak and many other items are more expensive. The price of potatoes has climbed 39-fold since 1913, but the price of eggs is up only 5-fold during the same span. Bread costs 25 times more; sugar costs 12 times more; coffee 20 times more, but rice only 8 times more.
If you’re looking for a more recent comparison, NPR crunched other BLS data comparing 1982 and 2012 (all in 2012 dollars) and found that most meats are much cheaper than they used to be (steak is down 30%); but some vegetables are more expensive (peppers up 34%).
How much do Americans spend on food anyway?
That’s not an easy question to answer, as circumstances vary so widely, but the USDA tries. A family of four with two children under 5 spent between $571 and $1,116 on food-at-home each month during 2015, the agency says. That same family with older kids spends between $657 and $1,305, proving it’s best to keep your kids from growing up.
On the other hand, a single male between 19-50 spends between $172 and $346 monthly. That doesn’t include eating out, of course.
Don’t be so hard on food
Finally, Kuhns stresses that inflation data on food is a very tricky calculation and government statistics can’t capture all the factors that really make up “price.” When calculating inflation for items like computers, economists factor in that buyers get more for their money today than they did in the past — today’s PCs are far more powerful. Those adjustments aren’t made for food, she noted, even though today’s supermarket shoppers get a lot more than they used to.
“When you go into a grocery store aisle, it’s nothing like 1985,” she said. “We have bagged lettuce. Imported vegetables. We have access to a lot more fruits and vegetables,” she said. “In the 80s, most stuff was local and you could only get what was in season. Now you can get whatever you want any time of the year.”
Bob Sullivan is author of the New York Times best-sellers Gotcha Capitalism and Stop Getting Ripped Off. His stories have appeared in The New York Times, the Wall Street Journal, and hundreds of other publications. He has appeared as a consumer advocate and technology expert numerous times on NBC's TODAY show, NBC Nightly News, CNBC, NPR's Marketplace, Terry Gross' Fresh Air, and various other radio and TV outlets. He helped start MSNBC.com and wrote there for nearly 20 years, most of it penning the consumer advocacy column The Red Tape Chronicles. See more at www.bobsullivan.net. Follow Bob Sullivan on Facebook or Twitter. More by Bob Sullivan