Michelle ThompsonOpting to cook a romantic meal at home with your partner this Valentine’s Day can lead to significant savings compared to dining out, even when excluding pricey Valentine’s Day menus. Recent data from the January Consumer Price Index reveals that Americans are finding it increasingly cheaper to eat at home rather than dine out. Grocery prices have risen by 1.2% year over year, while prices for food consumed at restaurants have surged by 5.1%.
This trend underscores the impact of inflation on Americans’ daily lives. Although the pace of price increases has slowed, prices remain considerably higher than pre-pandemic levels, contributing to a sense of economic discomfort. In an election year, elevated food prices, which reached their highest monthly rate in a year last month, could pose challenges for President Joe Biden’s campaign.
Interestingly, the gap between the rate of price increases for groceries and restaurant food has widened. In January 2023, dining out was comparatively cheaper, with food prices rising by 8.2% compared to the previous year, while grocery prices increased by 11.3% year over year.
Several factors drive this shift. In the post-pandemic era, consumers have allocated more of their budgets to services rather than goods. Increased demand for services has led to upward pressure on wages, particularly in sectors such as health care, government, and leisure and hospitality, including restaurants. This wage pressure compels companies to raise wages to attract and retain workers.
Goldman Sachs economists attribute many of these price increases to the delayed impact of robust wage growth in 2023, noting that wage growth is now decelerating. Overall, prices for services, including dining out, transportation, and entertainment, rose by 0.7% in January compared to the previous month, accounting for 148% of the overall 0.3% monthly increase in prices.
Which types of food experienced price increases?
Fresh vegetables are becoming more expensive, with prices in that category rising by 2.4% last month. The notable increase was observed in tomatoes, which saw a 4.6% price hike in January compared to December.
Timothy Richards, chair of Arizona State University’s School of Agribusiness, attributes this increase to two interconnected factors. Firstly, tomato prices were considerably lower in 2022, making subsequent increases appear more significant. Consequently, farmers, unable to fetch higher prices for tomatoes, shifted their focus to more profitable produce types.
Richards suggests that with high prices, the issue is likely to resolve itself in a few months.
Frozen noncarbonated juices and drinks recorded the largest price increases across all goods and categories tracked by the CPI. Prices surged by 9.9% on a monthly basis and by 29% over the 12 months ending in January. Weather events, particularly hurricanes, as well as the impact of a devastating citrus disease, are likely factors contributing to this trend.
Which items experienced price decreases?
Conversely, ham and shelf-stable fish and seafood experienced the most significant price reductions among all food categories monitored in the CPI.
Ham prices declined by 3.1% last month, while shelf-stable fish and seafood prices dropped by 2.9%.
On an annual basis, eggs continued to show the most substantial price decreases, with a decrease of 28.6% compared to the previous year across all CPI-tracked items. However, this trend may not persist for much longer, as egg prices increased by 3.4% last month compared to December, likely due to the resurgence of bird flu in the industry.
Lettuce (-11.7%) and apples (-8.9%) ranked second and third, respectively, for the largest annual decreases in food prices.
