An Inflationary Thanksgiving, Revisited | AIER

This time last year, I wrote an article called “The Horrors of a Non-Inflationary Thanksgiving.” In it, I explained that consumers looking for traditional holiday fare but choosing only food items that have not increased in price from the previous year (from 2020 to 2021) will be faced with a lackluster selection of goods. Between November 2020 and November 2021, the only foods that didn’t go up in price were hot dogs (no bun or seasoning), processed cheese, fresh lettuce (no other vegetables or salad dressing), and a very general category of “cookies”. Without payment, there would be no turkey, no gravy, no bread (rolls, bagels, or stuffing), no cranberry sauce. To drink, the only fixed-priced beverage at that point was water.

However, in November 2021, the US Consumer Price Index (headline, year on year) came in at just 6.2 percent. The Personal Consumption Expenditure Price Index (YoY) was stable at 5.2 percent. In particular, the Fed was still referring to the emerging inflation as “temporary.” In the sense that they were right. The general price level was within the United States moving in From high to much higher levels.

Due to the policy delay, prices continued their upward march for several months after the start of contractionary monetary policy measures in March 2022. At present, there are signs that inflation has subsided in some commodities, but prices for services and shelter continue to rise. Where the yield on 10-year US Treasury bonds a year ago was 1.58 percent, on November 18 it was 3.79 percent.

Shown here is the five-year trend in Thanksgiving dinner prices. All are based on Bureau of Labor Statistics (BLS) indicator values, and are not seasonally adjusted. In the data series below, white lane prices for turkey (“and other poultry”); Pink for baking, yellow for sauces and gravies. Blue for frozen vegetables. Oranges for canned fruit. and teal for frozen and refrigerated bakery products.

(Source: Bloomberg Finance, LP)

Below, percentage changes from 2020 to 2021 and 2021 to 2022 are shown. Since November index values ​​are not released until mid-December, annual values ​​are based on October BLS releases.

October October October
2020 to 2021 From 2021 to 2022 2020 to 2022
US CPI for other poultry including turkey 1.68% 16.89% 18.86%
CPI American Bread 2.29% 14.78% 17.40%
American CPI Biscuits, Rolls and Muffins 4.76% 13.57% 18.97%
American CPI potatoes 1.66% 15.19% 17.10%
American CPI Frozen Vegetables -0.30% 16.74% 16.39%
Fresh vegetables in the United States 1.69% 8.28% 10.11%
US CPI Canned Fruit 2.87% 18.68% 22.08%
Sauces and Gravy in the United States 1.76% 14.57% 16.58%
US CPI far from home 12.04% 8.59% 21.67%

As also indicated, individuals who choose to outsource Thanksgiving dinner to restaurants will face a sharp price hike this year. The emphasis on the ubiquitous difficulties of economic measurement, and the use of bread as a substitute for stuffing, is misleading. In fact, the USDA reports that the price of a 14-ounce bag of stuffing has increased 69 percent since the beginning of 2022.

In general, the American Farm Bureau Federation estimates that:

The cost of buying a turkey and trimmings to feed a family of 10 is the highest it has been in years[ir] The 37th annual survey puts the average cost of a classic Thanksgiving feast at $65.04 this year, which is an increase of $10.74, or 20 percent, over last year’s average price of $53.31.

But the costs associated with Thanksgiving far exceed what one can afford. Many Americans travel to celebrate the holiday with family or friends, so gasoline prices are appropriate. Some will travel via bus or train, others will travel, and they’ve all seen prices go up. Haircuts, dry-cleaned clothing, and pet care are additional expenses. One- or two-year price changes associated with these additional costs are shown below.

October October October
2020 to 2021 From 2021 to 2022 2020 to 2022
AAA Gasoline (Medium, US) 51.64% 20.00% 81.97%
US consumer price index for regular unleaded gasoline 51.28% 17.07% 77.11%
US CPI airline fare -4.63% 42.89% 36.27%
US consumer price index for intercity transportation 4.60% 4.07% 8.85%
American CPI Barbershop and Personal Care Services 4.31% 5.59% 10.15%
US CPI pet services including veterinary 3.93% 10.67% 15.02%
CPI American Laundry and Dry Cleaning 6.92% 7.19% 14.61%

As always, the price hike has many causes: supply problems caused by the war in Ukraine (especially with regard to grain), outbreaks of bird flu, and so on. But these are relative changes mediated by the price system, which indicates a shortage of producers and entrepreneurs locally and globally. The massive upward trend in the overall price level is related to only one factor: the massive and expansionary monetary policy efforts pursued throughout 2020 and 2021.

The chart below tracks the special Thanksgiving meal index consisting of turkey, gravy, bread, frozen vegetables, canned fruit, and frozen/chilled bakery item prices (white) against global M2 money supply (blue in USD) over a five-year period. The gradual appearance of the Thanksgiving Meal Index is due to the formation of the monthly data releases.

(Source: Bloomberg Finance, LP)

Americans are facing another costly holiday season due to harsh and arguably unnecessary monetary and fiscal programs early in the COVID pandemic. Despite recent attempts to frame inflation as inevitable or beneficial, both the rise in the price level and the delay in combating it rest with the Federal Reserve.

US CPI funeral expenses and US CPI tax preparation (5 years)

(Source: Bloomberg Finance, LP)

In relation to traditional notions of determinism, both death and tax rates have risen. Costs associated with funerals and tax preparation have risen by just under 5 percent and 10 percent, respectively, over the past 12 months.

Peter C Earle

Peter C Earle

Peter C. His research focuses on financial markets, monetary policy, and econometric problems. He has been quoted by The Wall Street Journal, Bloomberg, Reuters, CNBC, Grant’s Interest Rate Observer, NPR, and many other media outlets and publications. Pete has a Masters in Applied Economics from American University, an MBA (Finance), and a Bachelors in Engineering from the US Military Academy at West Point.

Selected publications

“General Institutional Considerations for Blockchain and Emerging Applications” Co-authored by David M. Waugh in The Emerald Handbook on Crypto Assets: Investment Opportunities and Challenges (Coming soon) edited by Becker, Benedetti, Nikbakht and Smith (2022)

“Operation Warp Speed” co-authored by Edwar Escalante at Pandemics and freedomEdited by Raymond J. Marsh and Ryan M. Yonk (2022)

“A Virtual Weimar: Hyperinflation in Diablo III” in The Invisible Hand in Virtual Worlds: The Video Game Economic SystemEdited by Matthew McCaffrey (2021)

“The Fickle Science of Lockdowns,” co-authored with Phillip W. Magness, Wall Street Journal (December 2021)

“How well does the Gold Standard function?” Co-author: William J. Luther, SSRN (November 2021)

Populist Prophets, Public Prophets: Pipers of Lucre, Then and Now financial history (Summer 2021)

“Boston’s Forgotten Lockdowns” in American conservative (November 2020)

Private governance and rules for a flat world Creighton Journal of Interdisciplinary Leadership (June 2019)

“The idea of ​​a ‘federal jobs guarantee’ is expensive, misleading, and increasingly popular with Democrats.” Business Investor Daily (December 2018)

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