Time to Move to Alaska?

Food price inflation is disproportionately important to consumers. As a high frequency purchase, food dominates consumers’ inflation perceptions (people remember the inflation of things that they buy regularly, and forget the price changes of occasional purchases), notes Paul Donovan, UBS Global Wealth Management

Not everyone is facing high food price inflation. In the US, it is best to buy groceries in Alaska – food consumed at home has barely risen in price over the past year. Falling meat prices and stable alcohol prices are behind this. Philadelphians might want to consider moving – Philadelphia’s food inflation is over 14% y/y.

The gap between the highest and lowest regional food inflation rates in the US has been over 10 percentage points almost continuously for the past eighteen months. This has never happened before—not even in the 1970s when US President Nixon’s disastrous attempt at price controls led to farmers refusing to sell food at all.

This extreme and persistent regional variation in food price inflation weakens the argument that farmers or supply chains are driving current inflation. If that were the case, Alaskans would be paying more for their burgers. This is also true in Europe where political comment around the causes of food inflation (with a focus on retailers) has increased.

Editor’s Note: Paul Donovan is the Chief Economist of UBS Global Wealth Management, www.ubs.com.