A fixture of the US political news cycle during the developed world’s worst bout of inflation in a generation were complaints from the White House that the savings from lower oil prices wasn’t finding its way to gas pumps fast enough.
Politicians blamed “price gouging.” Oil companies tried to explain why that didn’t make sense, largely to no avail.
It’s worth highlighting a conceptually similar juxtaposition between the UN’s gauge of international food prices and grocery inflation around the world.
The UN index stopped rising months ago, and generally fell off the media radar as a result. Falling international food prices don’t make for good apocalypse headlines and fear sells. The index surged to all-time highs following Russia’s invasion of Ukraine, which stoked concerns about a global food crisis. Vladimir Putin impeded the export of millions of tons of grain, including wheat and corn by blockading ports, prompting the OECD to warn of “famine” conditions in locales dependent on Ukraine and Russia for basic food staples.
Although the index’s streak of monthly declines (10) is a record, the gauge still sits at levels that would constitute a crisis by pre-war standards.
Indeed, last month’s headline reading (131.2) has only been eclipsed in the pre-pandemic/pre-war context during 2008 and 2011, with the latter spike blamed in part on Fed policies by the institution’s long list of global critics.
Perhaps the fact that prices remain very high relative to the data series’ (admittedly short) history explains why food price inflation is running at least 5% pretty much everywhere in the world, according to World Bank data, and is running 30% or more in at least a dozen locales. In the US, grocery bills are still rising at a double-digit rate, and food inflation in Europe and the UK is very high.
Every category in the FAO’s index remains elevated versus levels seen prior to the pandemic and the war.
Apparently, it’ll be a while before the world’s for-profit food companies can pass along any wholesale savings to consumers. As one CEO put it in December remarks to Bloomberg, “certainly there will be quite a lot of inflation still at the beginning of next year and for the next six months after that.”
To be fair, he might’ve been talking about inflation in general, not necessarily packaged food inflation specifically, but major companies have certainly raised prices to consumers to offset rising input costs.
In the developed world, many consumers were willing to eat and drink the markups last year, allowing corporates to protect their bottom lines. In developing nations, consumers don’t have that luxury. In frontier economies, every day is just a fight to survive.
