A Trip to the Grocery Store

Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control

Posted on 22 March 2008 by David Merkel

My wife is a busy woman, given that she homeschools our children, so when time gets tight for her, say around eight times a year, I do the grocery shopping for her.? It was maybe four months since the last time, though, and the prices were an eye-opener for me.? Anything dependent on grain as an input was a lot higher in price than before.? Most meat was higher, cereals, bread, etc.? Not that this is a complete or scholarly answer, but I see the inflation rising in food and in energy.? (Heating oil, gasoline)

Good thing we have “core inflation” to explain this away.? Others may see things differently, but I was genuinely surprised at the price rises.

I would post more, but my site hosting was down for most of the evening.

One thought on “A Trip to the Grocery Store”

Steve Milos says:

22 March 2008 at 11:03 am

David,

The key question is: is the increase in food prices an absolute or a relative price increase? Is it caused by things such as US government ethanol policy, and a change in third world diets as their populations become wealthier? Or is it caused by an inflation in the money supply, which has found it’s way into commodity futures and farmland? If it’s the first case, then I would argue that core inflation is still a valid concept, because why should the Fed orient policy based on Chinese diets or farm state politics? If it’s the second case, then one should absolutely disregard core, and focus on headline inflation.

I don’t know how to discern how much of the increase in food prices is a result of each of these factors, given that some of them are somewhat non-quantitative. Perhaps one could devise some sort of multi-factor regression to try and answer this question.

In any case, Happy Easter to you and your readers.

Steve

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