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Chart o’ the Day: Global Food Prices are Deflating

Every time I post a comment about inflation there appears an inevitable anecdote about groceries in the comments discussing how expensive they’ve gotten.  While I certainly appreciate these anecdotes and have my own to tell, I don’t put much credence into them because they simply don’t represent facts.  More often than not they represent a very imprecise individual experience that is almost certainly biased for various reasons.  But these anecdotal references are flawed for other reasons as well.

First of all, cherry picking items within the basket of goods that comprise the CPI means you’re no longer talking about “inflation”.  It means you’re simply cherry picking items.  Inflation refers to the price level of a BASKET of goods.  It’s not necessarily “inflation” if bacon prices are rising.  It’s only inflation if the basket of goods rises along with bacon.

Second, and more importantly, global food prices are not rising.  At least according to the FAO.  In fact, they’re FALLING at a rate of -2.7% and they’ve basically been falling now for the better pat of the last 3 years:



The CPI tells a slightly different story.  The food and beverage component has risen at an annualized rate of 2.6% since the year 2000 and 2.4% over the last three years.  That’s obviously not deflationary like the FAO index, but it’s still pretty low and certainly nothing to get too alarmed about.   Food prices just aren’t rising that much.  And in fact, the reason it’s probably higher in the USA than it is abroad is because the US economy has been strong in relative terms.  So don’t let these anecdotes get you too worked up as they don’t accurately reflect the global or national reality.

NB – Before I get the inevitable “you’re detached from reality, go buy some groceries like the rest of us do” comment, I’ll have you know that I do in fact buy my own groceries and actually enjoy it.  I’m usually the idiot carrying one of those baskets around with way too much stuff in it with my arms about to fall off as he tries to fit one more 12 pack of beer somewhere where it obviously doesn’t fit….

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