Why Today's Food Price Deflation is Unusual

Food price deflation has happened twice before in modern times: 1992 and 2008-09. But both of those periods were at economic cycle bottoms.

What makes the current food price deflation unusual is that it's occurring during an economic recovery. A food industry researcher calls it "weird," and says conditions could deteriorate further.

Read this excerpt from a July 29 Supermarket News article:

The current deflationary environment in food retail — particularly in the midst of an otherwise healthy economy — is a nearly unprecedented event in recent industry history and indicates an operating climate that has become "just awful," an analyst told SN July 29.

Current price deflation goes beyond the farm issues affecting the price of proteins like eggs and meat, [an analyst] told SN in an interview. It also reflects overstored markets, changing demographics and the continued growth of nontraditional competitors such as Amazon and Blue Apron.

"There are too many assets chasing too few sales due in large part to over-building and unfavorable demographics," the analyst said. "This is leading to slack revenue growth and falling prices."

The consumer price index for food at home has been negative on a year-over-year basis since December, the analyst said, noting that it was only the third time in the last 15 years food had turned deflationary. …

The analyst cautioned that the conditions could grow worse, citing demographic challenges. The Boomer generation has grown past its peak grocery buying stages and the Millennial generation is forming families later than preceding generations. That adversely affects shopping because young parents tend to be heavy grocery shoppers. Peak shopping by age belongs today to the meaningfully smaller Generation X, whose spending, the analyst said, "is spread even thinner across retailers."

You can read the entire article by following the link below:

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