Let's take a closer look at the Consumer Price Index report for April by looking at a category we interact with every day: food. For many households, grocery and restaurant expenses make up a significant portion of the budget. As a result, consumers tend to be particularly sensitive to rising food prices.
The “pretty good” news is that the food price index (the CPI bucket that includes all groceries) is unchanged from last month. Inflation rate is 0.0%.
Currently, compared to April 2023, food prices have increased by 2.2%. Not too bad considering the Fed's inflation target is 2%.
Still, that's when we're talking about the overall price. When you break it down, the story is a little different.
David Bieri, a professor of economics and public policy at Virginia Tech, said the 0.0% grocery inflation rate is a bit deceptive.
“Within that category, food pressures for eating in are down, but price pressures for eating out are increasing,” he said.
Menu prices still haven't kept up with inflation, labor shortages and all the other things the pandemic has made difficult. Bieri said eating out is becoming more expensive because “every service is going up in price.”
When restaurants have to raise wages, they try to pass that cost on to customers.
However, eating out is a luxury. Chris Barrett, an agricultural economist at Cornell University, is more interested in grocery bills “because we all eat every day.”
And we always pay attention to what we buy. Lower prices, or simply lower inflation rates, are especially good news for low-income households.
“Slowing the rate of rise in food prices is one of the things that implicitly provides us with a social safety net,” Barrett said.
Prices for fresh produce such as fruits, vegetables and meat fell sharply last month.
Michigan State University food economist David Ortega said it's no wonder packaged goods haven't followed suit.
“These products were manufactured at a time when raw material costs were high,” he said.
That means if tomatoes were more expensive last year, it could take a little longer for the salsa to hit the shelves.
Ortega said falling prices are certainly a good thing. But that doesn't immediately make consumers feel better about the economy. “Their impression of what's going on isn't really determined by the change in price; it's actually driven by the price level,” he said.
And food prices remain more than 20% higher than before the pandemic.
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