If it seems like your monthly food expenses are adding up to a higher amount than usual, you’re probably right. It might be a lot more, with a 12% rise in consumer food costs since 2021.
Monthly food expenses have risen so much that they have reached a thirty-year high, leaving many Americans scrambling to make up the difference elsewhere in their budgets. The average American now dedicates up to 11% of their budget to food, the highest amount since 1991. Alarmingly, most of this spike in cost has happened in just three years.
Even though most Americans report skimping on extras like desserts or treats, keeping monthly food expenses low is more challenging than usual. While the cost of food may have leveled off in some areas, other key commodities like sugar, beef, and potatoes continue to rise.
What Has Caused These Steep Price Increases?
Increased labor and production costs are also blamed for the unprecedented price hikes for consumers, occurring when most people’s disposable income has steadily decreased. Additionally, sharp increases in minimum wage rates are blamed for rising food costs, especially in California and Oregon.
The most significant rise in consumer spending continues to be in the ‘food-away-from-home’ category, with those expenses up 5% from January 2023. This rise in food cost has Americans making up the difference by cutting back in other areas, such as tightening their travel and leisure expenses.
The Federal Government is implementing various tools to reverse these concerning price increases. Examples include federal investments in improvements to the food supply chain and introducing new regulations to promote better market competition. Examples include federal investments in improvements to the food supply chain, and the introductions of new regulations aimed at promoting better market competition.
In the mid-1990s, the last time consumers faced monthly food expenses at this level, the Federal Government desperately tried to stave off accelerated inflation. Policymakers doubled interest rates to 6%, putting the brakes on inflation but driving expenses up simultaneously. The current federal administration has taken a similar approach to slowing the rising inflation.
Economists report that low unemployment numbers and a strong labor market should help in slowing down the rising cost of food, with optimism for a repeat of the inflationary soft landing that occurred in the mid-1990s.
What Can the Average Consumer Do in the Meantime?
Here are the top four things Americans can do to adjust their budgets to rising food costs.
- Cut down on take-out expenses: Eating more meals at home is listed as the number one way to reduce those expenses. For example, making coffee at home instead of getting coffee out can save as much as $18.25 a week (almost $950 per year). Despite the popularity of food delivery apps, skipping one delivery meal per week could add up to as much as $1,300 per year in savings.
- Reduce food waste: Cutting down on the food that is thrown away is also a key area to save money, with the average family of four spending $1,500 annually on food that is thrown away. The amount of food wasted in America is estimated to be 40% of the total food supply or 325 pounds of food waste per American annually.
- Source more of your food from plant-based sources: Including more vegetables and plant-based protein is another great strategy for cutting costs, particularly considering that the most significant market increases have been to animal proteins – especially beef and chicken.
- Use reward programs to your advantage: Using rewards programs, such as points systems at grocery stores, allows you to apply those credits to other areas, such as your travel and vacation costs.
While experts are not expecting any additional jumps in food prices soon, they caution that some food costs will continue to rise throughout 2024. Keeping a handle on those monthly food expenses is expected to be a top priority for many Americans in 2024.
