June 2024 data shows prices moderating, but grocery bills still high
July is my favorite month of the year. It has some very important dates including National Ice Cream Day on July 21st this year. Plus, my birthday and anniversary, and my older daughter’s birthday, all fall in July. And a bonus—July 29th is National Lasagna day! Two of my three favorite foods are celebrated in July. (Hamburgers are my all-time most favorite food. May 28th was its special day this year.) So this year, I have even more to highlight about that always important topic of inflation. And am somewhat encouraged to report that overall, 2024 inflation is improving. But that doesn’t mean prices are dropping.
A look at overall inflation
We’ve been on somewhat of a rocky road the past couple of years. During the onset of COVID-19, our economy ran into all kinds of problems, issues, and shortages. Demand was super high. Supply super low. Prices skyrocketed.
Not since the oil crisis of the late 1970s, early 1980s, have we experienced such dramatic inflation. Forty years ago, there were huge price spikes in oil and gas. And we all learned the hard way how inflation works.
The winter of 1978 was particularly cold and snowy. We lived in upstate New York, and it was bitterly cold. But with energy prices soaring, my parents kept the heat in the house set to a balmy 60 degrees during the day. And even lower at night. I’d bundle up in layers and wear gloves and a hat to bed. Sure was a memorable period during my high school years!
Here’s a look at just what was going on with prices between 1972 and 1982. Rampant inflation. It took well over a decade for those costs to calm down and for inflation to improve. But prices on most goods and services never returned to 1972 level. That’s not how inflation works.
2024 inflation is leveling out
Inflation woes for the past couple of years were directly related to the COVID crisis. We’re now seeing a slowing of rising costs as the economic ship has been righted.
Looking back to 2023, we saw overall inflation stabilizing in general. In June 2023, all prices were 3% higher than in June 2022. Still off from the Federal Reserve goal of 2%, but improving.
Now, halfway through 2024, we see prices continuing to rise, but modestly. Overall, inflation is up another 3% on all items.
But the overall inflation rate does not reflect what you are experiencing every week at the grocery store. Prices of ice cream or ingredients to make a lasagna are pretty darn high.
Food prices were up almost twice as high as the overall average in 2023: 5.7% for food vs. 3.0% all items. But by June 2024, food had increased year over year by only 2.2%.
Over the past couple of years, your grocery bill is up 8%, if not more. Depending on the items you buy.
Averages don’t explain your grocery bill
Looking at the broad categories under “food at home” you can see a lot of price changes. Here’s the latest from the Bureau of Labor Statistics on Consumer Price Index:
Look at the wild swings in prices. Depending on the category of food, you might see much higher prices at the grocery store. Or some items haven’t increased in price since last year.
The “other food at home” category includes sugar, oils, salad dressings, and peanut butter. Plus items like olives, spices, baby food, and prepared frozen dinners, to name a few.
Nonalcoholic beverages are coffee, teas, and sodas. They ran hot at 7.6% higher prices in 2023, but then came down somewhat in 2024.
The meats/fish/eggs and the dairy categories can fluctuate significantly due to situations on the farm. The avian flu epidemic in the last couple of years directly influences the cost of eggs. And chicken.
But groceries are so much more expensive
It’s shocking that when I run into the store for “just a few items” and have a $100 bill. There are only two of us at home in our empty nest. Somehow, I thought the grocery bill would be dramatically reduced. Not so much.
Driving the price increase is flour in 2023—an unfortunate result of Russia’s hideous war on Ukraine. Ukraine is the top 7 producer and top 5 exporter of wheat in the world. As Russia blockades the export lanes, the world will feel the price impact.
The ongoing increases in many staples keep prices higher than a few years ago. And all my favorite things: coffee, tea, ice cream, etc. tend to increase faster than the average. These costs may moderate, but will remain elevated going forward.
World events, health of livestock, and severe weather can dramatically change the price of food month over month and year over year. Consumers want prices to return to pre-pandemic levels. But that’s simply not going to happen.
How much does it cost to make a lasagna?
Let’s now look at the cost to make lasagna. How much more does it cost to make that pan of deliciousness now than in previous years?
Lasagna is an amazing food. You may know it’s also my casserole of choice when explaining how to create your retirement income plan. It’s the combination of finding all the ingredients, cooking your sauce for hours, then assembling the layers in the just the right way. It’s the process of making the lasagna that illustrates the process of making a plan for your income in retirement.
But how much would I spend at my local Stop and Shop to make a pan of lasagna?
In 2024, it costs an estimated $66.31. In 2023, the cost was $64.77. So this homemade dinner is up 2.4% for the ingredients.
Are you surprised by the amount to make one 13 x 9 pan of lasagna? Frankly, I was a little surprised. I go to the store every week and keep track of the grocery bills. But I never look at the cost to make one dinner. Sure, this will last 3 or 4 meals. Nevertheless, I was a bit surprised.
How much does it cost to make a lasagna?
To see where costs have changed, here’s a breakdown of the ingredients for three recent years:
When you look at each item, none of the costs are wildly different. You see small incremental changes year over year. Most of the time, we don’t really notice them.
But because the pandemic wreaked such havoc on so many parts of the economy, we have seen a huge increase in prices since 2020.
Food prices rose during the pandemic fast and high. By August 2022, prices for food at home had already increased 13.5% over August 2021. This was the largest 12-month percentage increase since 1979.
Did ice cream get hit as hard as lasagna?
In a blog post from a few years ago, ice cream prices were holding steady. The average cost for a half-gallon was about $5.00. Rising inflation had not really hit ice cream manufacturing. Costs tended to bounce around with some years being up followed by a year of decreasing costs.
With the COVID shutdown and the craziness in the economy in 2020 and 2021, ice cream prices were yo-yo-ing. In June of each year, the average price for a half-gallon went from $4.63 in 2019 to $5.81 in 2023, then $6.14 in 2024. That’s a whopping 32.5% increase since the summer before the pandemic!
Once we get into specialty, sugary foods, and desserts, costs can escalate much higher and much faster. Even though lasagna and ice cream both use dairy, once you add sugar, chocolate, and cookie dough, costs dramatically rise. Plus, ice cream has a manufacturing or producing cost component. That added step can be significantly higher than when buying individual raw ingredients.
Ice cream containers fit better in my freezer today
Have you noticed we no longer buy a half-gallon of ice cream? Those tubs of ice cream from years ago were much larger than today’s containers.
The standard is now a 1.5 quart container. That’s only 48 ounces of Friendly’s van-choc-straw or Breyers chocolate chip ice cream. Turkey Hill is packaging in 46-ounce containers. And they are definitely not cheap! And New England’s local favorite, Brighams, sells by the quart. (32 ounces, for those doing the math.)
Pricing runs from a low of 7 cents per ounce for Stop and Shop store brand to 10 cents/ounce for Friendly’s. Breyers is 12 cents and Tillamook 14 cents per ounce. Not surprising, Ben & Jerry’s sells for 28 cents per ounce and Haagen Dazs runs 41 cents.
With the soaring prices ice cream over the past four years, you probably have noticed the hit to your wallet. But you have more room in the freezer with the much small containers now!
At least wages have increased somewhat to account for these rising costs. But how are retirees handling this significant rise in groceries?
When inflation is improving, wages need to increase
At least most wages have increased somewhat to account for these rising costs. The federal minimum wage has been stuck in the last century at $7.25/hour.
Fortunately, most workers have seen a sizeable increase in pay since 2021. And new hires and job changers are demanding—and receiving—higher wages.
Plus, many of the high cost-of-living states have increased the minimum to $15, $17, or $20 per hour. While the federal government lags far behind modern times, many states have addressed what a living wage really means.
But how are retirees handling this significant rise in groceries? They don’t get a paycheck from an employer. Social Security does include a cost-of-living adjustment, but it can’t cover these kinds of price spikes. Those living on a “fixed income” are having a rough go of things.
These last couple of years serve as a big reminder. Once you are retired, it’s up to you to generate your own pay increase from your own money.
Inflation is a silent risk—it slowly creeps up over years without you really noticing it. Until we get a once-in-forty-years severe cost hike. And then, retirees need to know how to create more cash for groceries and everything else.
Does the 4% withdrawal rate accommodate inflation?
Many retirees and financial advisors have heard they can reliably withdraw 4% from savings to pay for retirement expenses. That tends to be a good starting point. Then, each year in retirement, retirees take out that initial amount plus an increase for inflation.
If one manages to pay all their bills with that amount, assets would typically last 30 or more years.
But most people are going to struggle with taking out so little from their retirement accounts. The average retirement plan account balance held by younger boomers, ages 59 – 68, is about $135,000. Higher-income boomers average about $408,000.
When they start living off this money, they’ll pull out 4% in the first year of retirement. And we’re not talking about a lot of income here:
- $5,400 for the low end ($450 per month) and
- $16,320 at the higher end ($1,360 per month).
That’s PER YEAR!
The following year, they would increase the amount they pull to account for inflation. If inflation ran at 6% year over year, they need to take out:
- About $5,700 for a lower average saver and
- About $17,300 for those with higher savings.
Is keeping up with inflation really the problem?
The problem of keeping up with inflation isn’t so much the math. Even in years when inflation spikes as it has over the last few years.
Instead, the problem is the initial amount saved. Most people cannot live on Social Security plus $450 per month. Or even Social Security plus $1,360 per month. That simply is not enough. And you can’t just manufacture cash. Keeping up with inflation—the equivalent of giving yourself a raise—is not the problem. Unless you don’t have enough to start with.
Most retirees have a two-prong problem. Their savings accounts are much too small. And a huge number of them will live well into their 90s. It’s this combination that makes it frustrating and challenging to deal with rising costs.
Some truisms about inflation to keep in mind
- Costs always rise over the long term.
- The Federal Reserve works hard to manage inflation within 2 – 3% increases each year. But even 2024 inflation is not yet hitting the mark.
- Every few decades, gigantic cost increases will hit us all. Think: the 1970s and 1980s and the 2020s.
- When there is a huge spike in inflation, it can take years for price increases to settle back down.
- But costs of goods and services rarely, if ever, go down.
Time for ice cream!
With this 2024 inflation report in mind, I’m sure you’re not delighted with this news.
But keep in mind retirees are a resilient group. They have lived through trying times before. There will be more challenges and inflation ahead. We can learn a lot from the older Boomers and those even older. They have found a way.
The trick is to understand the numbers and plan for the rising cost of everything throughout retirement. And do the math.
Take a closer look at your own cash flow. See how much more you are paying for groceries than you did last year. And estimate how much more you’ll pay over the next five years. Or twenty years. Better to know in advance than to be surprised.
But first, it’s time for some ice cream! Celebrate National Ice Cream Day with a smaller bucket of ice cream than in previous years. Enjoy every last bite!
For more information on 2024 Inflation…
Check out the monthly data from the Bureau of Labor Statistics on their website: https://www.bls.gov/
Use my latest book, Cookin’ Up Your Retirement Plan, to lay out future costs. There are budget worksheets and a 5-year table for healthcare costs. Now there’s an area to be worried about in retirement! The book is available on Barnes & Noble and Amazon.
