The Bureau of Labor and Statistics (BLS) Consumer Price Index (CPI) carries significant weight in the flow of decisions and confidence in the US economy.

1. Does the CPI mirror authentic food purchases?  YES!
2. Are household food expenditures and the Food CPI the same? NO!

The last few weeks, we have been enjoying a deep dive into a single household’s food prices.  There are no statistical inference abilities in this data.  It is a serially correlated, non-random sample of one observation.  Personal experience can be illustrative.

The BLS, CPI has many subsets.  The primary source of this data is the urban centers that are not seasonally adjusted prices.  The CPI of food is a subset of that data for all prices.  Within the CPI of Food are two subsets: Food At Home and Food Away From Home.  Both of these subsets shape the CPI of Food.  In 2024, the Food At Home CPI pulled the Food CPI down, while the Food Away From Home CPI has pulled the general Food CPI up.

The Food At Home CPI is grocery retail food.  It is the closest proxy for household grocery purchases.  It is useful to understand that the three CPI series in this chart refer to the right-hand vertical axis.  They are presented as a moving, 12-month sum of individual changes.  This gives an annual estimate for each month and is a common format used by the BLS.  The household food expenditures reflect monthly averages of $/oz.  These are monthly average prices over all the food items in the dataset weighted by total weight of groceries and price each month.  The left-hand axis reflects the household’s food prices.  The relationship between the two axes is somewhat arbitrary.  The left-hand axis was set in a way that allowed the 2024 Household Food data to overlay the CPI, Food At Home.  The monthly changes are relevant even though the units are different.  The household data was not sufficiently robust to index effectively.

Ways Food At Home CPI and Household Food are Similar.  Both the household price data and the BLS, Food At Home CPI are relatively flat in 2024.  Food Away From Home CPI in 2024 was responsible for most food price inflation.  Except for the rapidly increasing price of eggs, the Food At Home CPI was not.  The year end increase in the Food At Home CPI is credited mostly to the US egg shortage.  Egg prices did not have the same food expenditure influence in the 2024 household food costs.

Ways Food At Home CPI and Household Food are Different.  The most significant is the statistical power behind the BLS CPI.

1. The BLS CPI is composed of hundreds of thousands of prices collected continuously across the US.  The 2024 Household Food prices are from one household in a relatively remote area of downstate Illinois (not Chicago and not even St. Louis, Missouri).
2. The 2024 Household food manifests different food buying strategies.  These include buying in bulk, brand vs. generic brand selection, and shopping in remote areas vs. at grocers where there is retail food competition.  These are all imbedded in the Food At Home CPI, but are not influential due to the statistical power of the sample size.
3. The Food At Home CPI increased slightly over 2024, due in part to price increases of eggs.  The 2024 Household Food decreased over 2024, due to more purchasing discipline, buying in bulk, generic brands, and in large commercial centers.

Household food purchase ARE NOT the CPI, Food At Home.  This is important to know.

The macroeconomic knowledge of price level increases is very valuable to understand macroeconomic trends.  But consumers make microeconomic decisions.  Individually, every household is different than the CPI price levels.  This comparison uses US urban prices to evaluate food prices in a rural area.  The Midwest prices differ from the East and West Coast prices.  One household’s food preferences differ wildly from another household’s preferences.

Individual households can both outperform and underperform the macroeconomic price trends.  Economy-wide food price inflation does not mean affordable food is unavailable.  In 2024, simply eating more frequently at home than in a retail restaurant market reduced the consumer’s food inflation.

Consumers have purchasing power.  Make the best purchasing choices!  (“Best” is defined individually by each household.  This is the beauty of having market choices in the United States.  Losing that ability to make individual choices – adopting food mandates – will always be crushingly costly.)