I've heard a good deal of talk about rising food prices, but the data I've seen suggests that total food costs as a share of disposable income (i.e., after-tax income) are not substantially rising in the U.S.
The Consumer Price Index for food increased 4.0% in 2007, but total disposable personal income increased 5.7% in 2006, for a per capita increase of roughly 4.5%, taking into account the roughly 1.1% population growth rate. (Unless I'm mistaken, all these numbers are in nominal dollars, and thus are directly comparable.)
So the 2007 food price increase seems likely not to have changed the share of disposable income that goes to food. The likely 2008 increase, 4% to 5%, will likely have the same effect. Some press accounts point to large increases in prices for certain foods, such as milk and eggs. But the USDA data suggests that the overall increase -- which is what we should care about, unless we're in an unusually custard-consuming household -- is much more modest.
But let's even say that the prices increase in 2008 by 6%, and per capita disposable income increases only by 3%, so that the share of disposable income that goes to food rises by 3%. That would be an increase from 9.9% of disposable income (the 2006 share that's likely to remain stable for 2007) to 10.2%. For some perspective, here are the numbers on U.S. food spending as a fraction of disposable personal income in the past:
|Year||Food spending as share of disposable income|
So an increase from 9.9% to 10.2% puts us at the 1999 level, which as I recall was quite bearable. Not a major change, it seems to me -- or is there something that I'm missing here?