Americans finally get relief from soaring grocery prices, but there’s a catch

Online grocery prices declined sharply in August, but overall food inflation remains elevated compared to a year earlier
By Sam Bourgi
•
19 September 2024
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grocery, food

U.S. grocery prices plunged in August by the most on record—but only for online shoppers.

According to data from Adobe Inc., online grocery prices declined by 3.7% from July, marking the largest drop since record-keeping began in 2014. Compared to a year earlier, online grocery prices were up by just 0.5%.

During the peak of the inflation spike in December 2022, online grocery prices rose 13.5% from a year earlier, marking a near vertical increase from the summer of 2021.

The good news is online grocery prices are moderating from their peak. The bad news is that this form of shopping only accounts for 12% of the national grocery market. According to eMarketer, this figure is expected to grow to 15% by 2026.

Zooming out, overall food inflation rose 2.1% annually in August, according to the Bureau of Labor Statistics.

A carton of eggs was 28.1% more expensive than a year ago. The price of juices and drinks spiked by 18.3%, while dried beans increased by 6.8%.

The prices of meat, fruits and vegetables, whole milk, and even sugar were all up by at least 3% compared to August 2023.

So, while many economists are cheering the Federal Reserve’s progress in taming inflation, ordinary Americans have very little to be happy about.

Putting food on the table has become much more expensive

It’s hard to be optimistic about moderating prices when grocery store inflation—known as “food at home”—is up a whopping 21.4% over the past four years, according to macro strategist Charlie Bilello.

This is higher than medical care (7.8%), apparel (12.7%), used cars (18.3%), and new cars (20.5%).

Grocery prices have been a major source of consternation for Americans. According to a recent TD Bank survey, 50% of respondents said their spending on groceries increased more than any other category over the past year.

This partly explains why 67% of survey respondents said they’re dealing with financial stress due to rising costs.

A separate study from USA Today revealed that 40% of Americans said grocery prices were their most frustrating expense—higher than any other category, including housing, insurance, and even debt payments.

Although shoppers can usually blunt the impact of rising prices by substituting for cheaper options, that’s no longer a winning strategy.

According to a study by the National Bureau of Economic Research, the prices of cheaper grocery store items rose between 1.3 times and 1.9 times faster than their more expensive alternatives.

Although Vice President Kamala Harris has tried to blame price-gouging for soaring grocery prices, the actual data doesn’t support her claim.

As Creditnews reported, based on an NPR analysis, grocery-store profit margins have either declined or risen by less than 1% since 2018.

In other words, the profit margins of large grocers and their suppliers were mostly flat during and after the pandemic.

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