Thanksgiving Price Crunch

Posted by - Monday, November 19th, 2012

If you're preparing to travel this week for the Thanksgiving holiday, you may have been thrilled to see gas prices at the lowest they've been in four months. The national average price was $3.449 at the start of last week, continuing a slow drop in prices that started in early October.

But food prices are going up, and the holiday hosts and hostesses will be shelling out more for this year's Thanksgiving feast.

Food prices have jumped 13 percent between 2005 and 2011. But turkey has gone up much more – 47 percent in the same period.

According to a Labor Department report released last Thursday – a week away from the big, food-centric holiday – the consumer price index (CPI) increased a mere seasonally-adjusted 0.1 percent in October from the previous month, with a yearly increase of 2.2 percent. Food prices were up 0.2 percent.

The price for “other poultry including turkey,” however, was up 5.5 percent from a year ago on an unadjusted basis.

“Unadjusted” prices are more realistic to what consumers pay. Seasonal adjustment removes seasonal factors like a summer jump in gasoline demand or holiday feasts.

But these are factors that directly affect the prices, often in that particular month or season.

From U.S. News:

“When I go to the gas station and the price has gone up in the summer because of the high gas demand in the summer, I don't get to tell the guy at the window, 'I'll go for the lower, seasonally adjusted price,' says [the American Institute for Economic Research's Steven] Cunningham.

That's why the American Institute for Economic Research has come up with its own measurement to rival the CPI. The Massachusetts company releases an Everyday Price Index (EPI) each month, incorporating these price fluctuations.

The EPI is an adjusted form of the CPI. Whereas the CPI incorporates all sorts of consumer goods – big purchases like cars and appliances included – the EPI narrows this down to what the average person spends money on daily.

It measures things like groceries and gas, television services and phone bills, and entertainment expenses like movies and sporting events. And it isn't seasonally adjusted.

This year, the EPI found that prices grew 5.2 percent from the start of 2012 through September. The CPI reported a rise of only 1.9 percent.

The CPI tracks trends, but as far as the consumer is concerned it can be highly deceiving. Except for the summer months of 2011, the EPI consistently shows higher jumps or dips than the CPI:

EPI vs CPI

This summer's drought created a severe shortage in the U.S. supply of corn and soybean product. This has affected both meat prices, since the crops are used in feed for cows and pigs, and food prices in general, as corn is a major ingredient in many foods.

And the fact that fuel prices are falling now doesn't mean they've lowered enough to offset this year's gains.

From AIER.org:

The past two months' EPI increase is primarily driven by continuously rising oil prices. Motor fuel prices rose 4.1 percent between August and September and 17.1 percent so far this year.

Despite what the Department of Labor wants you to believe, you can find truth in the supermarket prices. And the way real prices are trending, the upcoming holiday feasts are going to significantly lighten the wallets of many Americans.

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