Many Americans are struggling to stay on budget. Widespread unemployment means many households are having trouble making ends meet, for one. However, there are other financial impacts of COVID-19, including rapidly rising grocery prices.
How Much Grocery Prices Have Changed
Prices on many food staples have increased dramatically in recent months. In fact, the one-month price increase was the largest in 46 years, leading consumers to pay an average of 2.6 percent more at the register. The last one that outdid it was in February 1974.
Categories that saw the biggest increases included meat, fish, poultry, and eggs. When it came to eggs, the average price hike was over 16 percent.
However, other food categories aren’t unaffected. The price of apples went up by 4.9 percent, while bread and cookies rose 3.7 percent and 5.1 percent, respectively.
Beyond food, items like toilet paper and certain cleaning and medical supplies also saw rising prices. In some cases, price gouging was an issue, leading to toilet paper being sold for $10 a roll, for example.
The massive spike in demand and fast-dwindling supply created an opportunity to take advantage of desperate consumers. While many areas have laws against such activity, that doesn’t prevent it from occurring, at least in spurts. Consumers who needed those items may have had little choice but to deal with being overcharged.
Why Grocery Prices Are Increasing
In many cases, price increases are the result of a simple principle: supply and demand. Once shelter-in-place orders became the norm, and people began spending nearly all of their time in their houses, meals at home became increasingly common.
This put additional pressure on grocery stores as consumers began buying more items or in larger quantities. Inventory in some categories disappeared fast, a fact that can trigger price increases that serve as an attempt to stabilize product availability.
Additionally, grocers had to compete with each other to get products to replenish their shelves. In some cases, this leads to a bidding war, where the highest offer gets the goods. Then, the grocer raises its price on the product to recoup their investment and still turn a profit.
Shifting Workforce Needs
Price adjustments can also be attributed to shifting workforce needs. Many stores had to hire new customer service workers, shelf stockers, and cashiers in droves, leading them to offer higher pay rates to entice people to apply. In some cases, they also had to have more employees work overtime, which usually involves paying wages at time-and-a-half or more. This led to growing personnel costs, something that commonly is balanced by pricing products higher.
Then, as mentioned above, there’s the issue of price gouging. While not as rampant as it may have been initially, instances of the activity may continue until the situation calms.
Finally, there have been some mild to moderate disruptions in the supply chain. At times, producers had to shut their doors in response to the pandemic. Usually, this had nothing to do with shelter-in-place orders, as these companies easily qualify as essential businesses. The issue actually involved the virus sweeping through production facilities, causing widespread illness in the producers’ workforces and a need to disinfect contaminated surfaces.
For example, two Tyson Foods pork processing plants had to shutter in April. Plant employees tested positive for the virus, and many others feared getting sick, creating issues with maintaining a suitably sized staff to support operations.
Even production facilities that didn’t close, at times, had to operate at reduced capacity. Shipping companies felt the strain as well, delaying the arrival of replacement inventory. When the supply chain is disrupted, price hikes are almost guaranteed.
Are Grocery Price Increases Permanent?
In most cases, the grocery price increases won’t be permanent. Though, it’s important to note that falling prices are dependent on market stabilization or supply outpacing demand.
There have already been signs of this occurring for some products. For example, while eggs saw a massive price increase in April, as of mid-May, prices are moving down. In part, this is due to regulatory changes that allowed some egg producers to send product that would usually go to restaurants to grocers instead. Whether the cost will fall to pre-COVID-19 levels isn’t known, but any decrease is likely welcomed by cash-strapped consumers.
But not all categories are seeing a recovery currently. Pork prices may remain higher for a period, mainly due to the supply chain disruption. The plant closures and production level changes led some farmers to euthanize their animals since they had no place to send them. This decreased the available supply. Additionally, demand for pork exports rose, partially due to African swine fever impacting China’s supply before the coronavirus pandemic began.
Are All Prices Rising During COVID-19?
No, not all prices are increasing in response to the pandemic. Certain categories have even seen dramatic declines as people began to change their plans and habits.
For instance, gas prices tumbled as stay-at-home orders meant fewer people were on the road, significantly lowering demand. Transportation and apparel also had notable declines.
Some prices have also been relatively stable. For example, electricity rose a modest 0.1 percent, while new vehicle prices didn’t shift at all.
How to Keep Your Grocery Budget Under Control
The same techniques for controlling your grocery budget that worked pre-COVID-19 also work today. Stores are still holding sales to entice customers to choose them over competitors, so shopping around is beneficial. Using sales flyers to plan meals can also work.
Additionally, being part of a loyalty program and coupons can help you keep your costs down. In both cases, you may be able to secure discounts or deals on items you need.
It’s also important to be open-minded. Unless you have a specific requirement that makes sticking with one brand a must, consider exploring every option available in a product category, including name-brands and store-brands.
By making a change, you might be able to lower the cost of your groceries. Plus, when you factor in sales and coupons, the cheapest option may change from week-to-week, which is why you should always look before you buy.
Are changing prices straining your budget? Do you have any tips that can help people keep their grocery costs down? Share your thoughts in the comments below.
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