Americans are spending more on food, forcing many to change dietary habits

Americans are spending more on food as a percentage of disposable income than at any time in more than 30 years, underscoring their struggle with surging inflation.

According to the latest USDA data for 2022, U.S. consumers spent 11.3% of their disposable income on food. That’s comparable to 1991 when 11.4% of disposable income went toward food.

Annual food-at-home prices shot up 11.4% in 2022, marking the worst year for food inflation since 1979. Although peak inflation is behind us, food prices continue to grow at double the rate of their historical average.

In 2023, food-at-home prices increased by 5% annually. The 20-year average is 2.5%.

Between 2019 and 2023, food prices increased by a staggering 25%—much higher than the overall inflation rate of 19.2% over the same period.

As The Wall Street Journal reports, many diners say they’re eating out less frequently, skipping appetizers, and buying cheaper store brands.

While it’d be a stretch to say Americans are eating less, they seem to have cut down on meat and reduced their restaurant outings to better manage expenses. They’re also spending less on booze and dessert, the Journal reports.

One thing is for sure: Food insecurity shot up with inflation, exposing millions of low-income households to nutritional deficiencies.

Food insecurity rises with inflation

According to the American Enterprise Institute, food insecurity measures the amount or types of food families want. “Very low food insecurity” measures serious disruptions in food due to a lack of resources.

During the height of the inflation scare in 2022, roughly 17 million American households reported problems finding enough food, up from 13.5 million the year before, according to a report by the Department of Agriculture.

The problem was two-pronged: Inflation made food more expensive, and supply chain disruptions made it harder for families to find the groceries they needed. The situation became worse once the government ended its Covid stimulus programs.

Food insecurity “underscores how the unwinding of the pandemic interventions and the rising costs of food has taken hold,” according to Geri Henchy, director of nutrition policy for the Food Research and Action Center. “It’s like a horrible storm for families.”

The silver lining is that food inflation decelerated in 2023, which “should alleviate some of the strain on low-income households and allow food security rates to stabilize,” according to Angela Rachidi, a senior fellow at the American Enterprise Institute.

Inflation continues to haunt Americans

Although food inflation may be running hotter than other categories, it’s not the only form of inflation that’s continuing to erode consumers’ purchasing power.

As Creditnews reported, the government’s consumer price index (CPI) came in higher than expected in January, with Americans paying a lot more for electricity, auto insurance, baby formula, car repair, and haircuts compared to a year ago. Those goods and services were only the tip of the inflation iceberg that month.

Concerns about inflation were the main reason that consumer confidence took a dip in February, based on the Conference Board’s monthly tracker. Although 12-month inflation expectations moderated somewhat, they remained elevated at 5.2%.

In February, “overall inflation remained the preoccupation of consumers,” said Dana Peterson, chief economist at The Conference Board, although “they are now a bit less concerned about food and gas prices.”

“But they are more concerned about the labor market situation and the U.S. political environment,” Peterson said.

Elevated inflation is a major reason why so many Americans continue to take on credit card debt. In the fourth quarter, consumers added a cumulative $50 billion to their credit card balances, bringing their total debt load to a record $1.13 trillion.

“Americans are still struggling with lingering inflation and rising interest, forcing them to lean on credit cards more and more,” said LendingTree’s chief credit analyst, Matt Schulz.