Statistics Reflect Rising Prices; So Do Shoppers’ Growing Bills
Opal Rolph considers herself a smart shopper, so she buys meat only “on special” and passes up many costly snack foods and fruits. But as food prices shot upward last month, Rolph, 81, says she finds it harder to keep her food bill under control.
“I just don’t buy as much,” she said Thursday as she loaded her shopping bags into her car at the Vons’ Pavilions store in Monrovia. Her sister and shopping companion, Florence Logsdon, 83, agreed. “We’re a lot more choosy now.”
This week, the Labor Department confirmed what the sisters, and thousands of other shoppers around the country, had already observed. The department said that food prices rose a surprising 0.7% in January, and that consumer prices overall jumped 0.6%--the largest one-month gain in prices in two years.
Just about everything on the supermarket shelves cost more last month. The department said prices of meat, poultry, fish, eggs, dairy products and baked goods all rose by 1% or more in January as the agriculture industry continued to feel the effects of last summer’s devasting drought. “It’s just outrageous,” Rolph said.
With food prices rising, Rolph can at least take comfort in the fact that it now costs less for her to drive her station wagon to the supermarket. Average prices of unleaded gasoline fell 1 cent to 82 cents a gallon in January.
But, surprisingly, the dip in gasoline prices is not obvious from the statistics coming from the Labor Department this week. Though the department agrees that food prices have shot up, it contends that gasoline is more expensive, too, despite the actual drop at the pump. In fact, in a number of other cases as well--new cars, used cars and hotel rates, for example--the figures coming from the department do not match the real price changes most consumers experience.
That is because the Labor Department uses a little-understood economic formula to “seasonally adjust” prices. Also, the department’s method of surveying prices does not always pick up price changes when they occur, so there is some lag that affects the consumer price index, which is made public monthly.
The department says that its adjustments make sense because they discount ordinary seasonal factors--such as changes in the weather--that affect prices in order to help economists find an underlying price trend and measure inflation.
But, very often, these trends are not reflected on the price tags in supermarkets, department stores or even car dealerships.
“It’s a little like ‘Alice in Wonderland,’ ” said Thomas Burns, an economist with the Chevron oil company in San Francisco.
In the case of gasoline, the Labor Department’s statistics turned the price drop into a sizable 1% increase. Joseph Shellena, the motor fuels price analyst at the Bureau of Labor Statistics in Washington, said the price dip was considered an increase for purposes of the consumer price index released Wednesday because “prices didn’t drop as much as they normally would this time of year.”
Industry analysts said gasoline prices did not drop as much as in past years because of an increase in demand and higher crude oil prices. Demand for gasoline in January was unchanged from December but was 6% higher than in January a year ago, said John Lichtblau, president of the Petroleum Industry Research Foundation.
At the same time, the price of crude oil rose as a result of a November agreement by the Organization of Petroleum Exporting Countries to cut production. According to Chevron economist Burns, OPEC’s oil production dropped from 22 million barrels a day during the last three months of last year to about 19 million barrels daily in January.
“While successful in raising the crude oil price, its not enough to raise the price of gasoline,” said Burns. “It is enough to keep gasoline prices from falling farther than they might otherwise.”
The Labor Department also reported a large 0.7% increase in the prices of new and used cars and trucks, at a time when none of the domestic auto makers--General Motors, Ford and Chrysler--raised prices. The only car manufacturer to actually raise prices in January was Nissan, said Jack Teahen, a senior editor at the trade journal Automotive News in Detroit. He said Nissan raised prices on its new cars and trucks by 3%. “That’s not enough to raise the entire industry average by nearly 1%,” he said.
Tod Reese, the new car price analyst at the Bureau of Labor Statistics, said the price increase reported by the Labor Department reflects a lag in reporting the price changes most American car makers put into effect last October.
And the explanation for the equal 0.7% jump in used car prices? “It’s an aberration,” said Jeffrey Kellor, a used car price analyst with the Bureau of Labor Statistics. He said sales were light during January at wholesale car auctions, with only 35% to 45% of the used cars brought to the auction markets actually being sold. When sales are light, he said, the monthly price movements tend to be less accurate.
Hotel and motel rates actually rose 2.1% in January, the Labor Department said. But when churned through the formula used for the consumer price index, the increase was transformed into a seasonally adjusted decrease of 0.4%. That is because the rates did not rise as much as expected at this time of year.
And in the case of food, prices for meat, fish, eggs and poultry led the way, actually shooting up a whopping 2.1% in January. But the seasonal adjustment softened that increase to 1.6%.
“Seasonal adjustment is gobbledy-gook,” said Shellena, the Bureau of Labor Statistics motor fuels price analyst. “It is used for a trend over a period of time. It’s not a true reflection of prices.”
Food industry analysts said beef prices rose because cattle herds are smaller and consumers want more expensive, leaner meats. The increase in beef prices is helping to carry upward the prices of pork and chicken, despite ample supplies of each. Eggs prices shot up as they recovered from abnormal lows during the summer, brought on in part by low demand because of a salmonella scare in the Northeast.
What does all this mean to the consumer?
Frideh Salehpour, 36, a shopper at Pavilions on Thursday, shrugged. She says she has watched the price of milk--with no seasonal adjustments--climb, but she cannot stop buying it for her two young growing sons.
“We have to have milk,” she said, as she strapped her youngest boy, Kevin, into his car seat. “So I buy it.”
A SAMPLE OF CONSUMER PRICES
Month- Price ($) Price ($) Price ($) to-month Item (unit of measure) Jan., 89 Dec., 88 Jan., 88 % change Eggs (grade A, 1 dozen) $0.94 $0.83 $0.76 +13.3% Ground chuck (lb.) 1.81 1.79 1.74 +1.1 Sirloin steak (lb.) 3.39 3.23 2.99 +5.0 Whole chicken (lb.) 0.91 0.89 0.74 +2.2 Chunk tuna (lb.) 2.24 2.18 2.15 +2.6 Ham (lb.) 2.75 2.60 2.77 +5.8 White flour (lb.) 0.23 0.22 0.20 +4.5 Whole milk (half-gallon) 1.23 1.21 1.16 +1.7 Rice (white, uncooked per lb.) 0.49 0.48 0.45 +2.1 Unleaded gasoline (gallon) 0.92 0.93 0.93 -1.1 Natural gas (one therm) 0.59 0.58 0.57 +1.7 No. 2 fuel oil (gallon) 0.88 0.83 0.89 +6.0
Year- to-year Item (unit of measure) % change Eggs (grade A, 1 dozen) +23.7% Ground chuck (lb.) +4.0 Sirloin steak (lb.) +13.4 Whole chicken (lb.) +23.0 Chunk tuna (lb.) +4.2 Ham (lb.) -0.7 White flour (lb.) +15.0 Whole milk (half-gallon) +6.0 Rice (white, uncooked per lb.) +8.9 Unleaded gasoline (gallon) -1.1 Natural gas (one therm) +3.5 No. 2 fuel oil (gallon) -1.1
Source: Bureau of Labor Statistics
