Of all the puzzles facing investors and savers, inflation may be the most perplexing. Economic data suggest prices are rising very, very slowly. The world’s inflation rate is the lowest in more than two years, the OECD said on June 4, and the U.S.’s April inflation rate of 1.1 percent is less than half its already-low rate of a year ago.
Still, we’re anxious about inflation, and we should be, because inflation shrinks our purchasing power and that can push goals out of reach. Consumers surveyed by the University of Michigan worry the inflation rate will nearly triple over the next year.
Even if the inflation rate stays at these imperceptible levels -- and there is considerable debate about the accuracy of the various official rates -- our individual expenses could rise much faster. Each of us spends money in areas of the economy that have wildly different inflation rates. Compare the cost of medical care -- up 112 percent since 1993, according to the Department of Labor -- with the cost of apparel, which is down 3.6 percent for those 20 years.
While almost all of us pay for housing, house prices rise and fall differently from block to block. Gas and food prices -- considered too volatile to be included in the “core inflation” gauges -- may seem like they'd affect us all to the same degree. Yet some of us fuel up twice a week to drive hundreds of miles, while others never touch a gas pump.
Or take the example of vegans. Last week brought good news for vegans, vegetarians and other plant eaters. The latest U.S. Department of Commerce data showed prices of fresh fruit and vegetables plunging. Vegetable prices dropped 2.3 percent from March to April, a swing that works out to an annualized rate of negative 24 percent. There was good news for home cooks, too, as calculations by the Dallas Fed showed costs of “more-processed” foods rising, while those of less-processed raw materials fell. Meanwhile, prices for eggs and seafood rose.
The drivers of food prices are so complex and unpredictable that this could very well end up a one-month statistical blip. In any case, it’s clear this data barely capture how food prices really affect consumers. Does your favorite dish rely on romaine lettuce (up 17.5 percent year-over-year according to the Labor Department) or white potatoes (which are down 10.3 percent)? If you’re a vegan, do you buy only organic? Do you cook at home with cheap, basic ingredients like beans, grains and veggies, or do you buy prepared foods like meat substitutes that can be pricier than real meat? Do you shop at supermarkets, specialty boutiques, farmer’s markets or corner bodegas – all with different prices and merchandise?
Of course, vegans – like all consumers – can shift spending from pricey options to cheaper ones. That doesn’t mean they will. Geoff Watland, a 36-year-old New Orleans resident, says he pays “inflated prices” at his local food co-op because vegan, organic food is hard to find in the city. He doesn’t see non-vegan food as food at all, he says, and increasingly feels the same about non-organic or genetically modified food. “It’s like asking me to eat cardboard or arsenic at a lower price,” he says.
What’s true of vegans is true of omnivores. No matter what the price tags say, once you’re committed to a certain lifestyle, cheaper options can no longer feel like options at all.