President Joe Biden is regularly promoting signs of a strengthening economy and easing inflation, but when it comes to the indicator closest to home, it’s a tough sell.
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(Bloomberg) — President Joe Biden is regularly promoting signs of a strengthening economy and easing inflation, but when it comes to the indicator closest to home, it’s a tough sell.
The surge in grocery prices since just before the Covid lockdown has been stunning: up more than 25%, a full 5 percentage points more than consumer prices overall.
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The president has tried channeling consumers’ ire toward food companies and grocery chains, accusing industry giants of abusing market power to raise profit margins at the expense of customers. And he’s tried commiserating, complaining about packaged food “shrinkflation” in a Super Bowl-timed Instagram video and again in his State of the Union address.
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But Americans’ regular trips to the grocery store — three times a week for the average US household — are a powerful driver of economic discontent, constantly reminding consumers of the higher cost of feeding a family.
The outsized increase in the cost of food is hurting support for Biden, especially among crucial Democratic constituencies such as minority groups. Low-income and lower-middle class families are squeezed hardest because they spend a larger share of their income on food.
Kendra Cotton, executive director of the New Georgia Project, which seeks to register voters among marginalized groups, is hearing particularly from Black people about the cost of groceries and everyday expenses. Often, they blame the president, regardless of how much control he has, she said.
“You’ll hear a lot of commentary that government ‘hasn’t done jack for me,’” Cotton said.
In Georgia, a pivotal election battleground, lower-income voters have swung sharply against Biden, mirroring national trends.
Biden narrowly carried the state in 2020, with his strongest support among voters who had a household income below $50,000. Now Georgia registered voters with the same incomes prefer Donald Trump to Biden 50% to 41%, according to a Bloomberg News/Morning Consult poll in February.
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Nationally, seven in 10 consumers say they are very or extremely concerned about the cost of groceries, more than any other spending category, including gasoline and rent or housing, according to a February poll by the grocery-industry trade group FMI. Forty-two percent said they were worried about having enough money to buy food in December, the last time FMI asked, compared to 26% at the March 2020 onset of the pandemic.
Omar Ceesay, a 44-year-old insurance claims adjuster and manager from an Atlanta suburb, said the $220 he used to lay out for groceries just a few years ago now only lasts a fraction as long. A 2020 Biden supporter who’s now undecided, he’s grown discouraged with the president over food prices and other economic challenges.
“We cannot readily point to anything that the Biden and Harris administration did directly that affects our bank account,” Ceesay said.
Despite the signs of economic strength Biden touts — such as low unemployment and wage growth that is outpacing overall inflation — Americans are wary of the prices in grocery aisles. Shoppers are shifting to less expensive private label brands. They’re buying more longer-lasting “shelf-stable” products such as pasta and rice. And they’re choosing cheaper cuts of meat, like chicken thighs over breasts, said Andrew Harig, a vice president with FMI.
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By volume, steak sales over the last 12 months were down 20% from the same period four years earlier, according to consumer research firm NIQ.
Americans are even buying less food overall, with industry executives suggesting consumers may be eating more leftovers and digging deeper into pantries to save money. Measured by unit, grocery purchases over the past 12 months were down 2% from the prior year, though spending is up because of higher prices, according to NIQ.
“For many households, the discretionary budget is what’s left over after paying for food, so the grocery store is the place where we tend to be most aware of inflation,” said Wells Fargo & Co. economist Tim Quinlan.
Profiteering Accusations
The White House is amping up criticism of food companies that Biden officials say won’t bring down prices despite healthier profit margins than pre-pandemic times.
Grocery companies counter that they’re offering cheaper products to consumers looking to save money and working with suppliers to keep prices low. Economists are divided on the role corporate price-gouging may play in US inflation.
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“Markups for all retailers spiked during the pandemic, but as they’ve come back down for all other retail groups, food and beverage markups remain elevated,” Jared Bernstein, chairman of Biden’s Council of Economic Advisers, said in an interview. “As their supply chains have improved and some of their input costs have eased, these producers appear to be lagging in passing savings to the customers.”
The Federal Trade Commission sued in February to block Kroger Co.’s $24.6 billion acquisition of Albertsons Cos., arguing the merger would drive up grocery prices.
Democratic Senator Bob Casey, facing a competitive reelection fight in Pennsylvania, has hammered away at grocery prices for months. In February, he introduced legislation — endorsed by Biden — to crack down on “shrinkflation” by targeting it as an illegal unfair and deceptive trade practice.
Casey said his constituents “are sick and tired of digging deeper into their wallets for their weekly grocery runs while corporate executives laugh all the way to the bank.”
Benefits Expiration
The expiration of a pandemic boost in food stamp benefits last year has worsened the impact on millions of lower-income families.
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Read More: Lines Down the Block at Food Banks as Covid Aid Ends, Costs Rise
The food sector’s concentrated supply chains, global turmoil and extreme weather are responsible for the run-up in prices, said Gary Barraco, an assistant vice president at the supply chain software company e2open. Russia’s invasion of Ukraine also drove up the cost of crucial farm supplies including fuel and fertilizer, he added.
Food Price Outlook
Food prices aren’t likely to go down before the November election, said Arun Sundaram, an analyst for CFRA Research.
Still, the US Agriculture Department forecasts grocery inflation will be contained to 1.6% for this year, citing slowing energy costs and falling prices for some agricultural commodities and farm supplies such as fertilizer.
How much food inflation eases will be partially driven by a struggle between grocery chains and their suppliers over costs. In France, grocer Carrefour SA pulled PepsiCo Inc. products from shelves in January because of price hikes.
Food producers and retailers are grappling with how to get shoppers to load up their grocery carts, including appealing to them through discount promotions, said Moritz Breuninger, a principal specializing in food and beverage companies at Kearney, a management consulting firm.
“You don’t want to give back what you’ve built” by dropping prices too much, Breuninger said. But food companies risk antagonizing retailers with more price increases. “They know it’s going to be a tough conversation.”
—With assistance from Alex Tanzi and Augusta Saraiva.
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