I groan each time I go to the grocery store, and I‘m not alone.

Grocery prices have been rising for over a year, but have accelerated recently. If freight rail workers go on strike this week, expect supply-chain snarls to drive food prices even higher this fall. 

What’s happening

The Bureau of Labor Statistics released its monthly consumer price index (CPI) or inflation report. The headline year-over-year inflation rate slowed slightly in August to 8.3% from 8.5% in July. This is lower than June’s 9.1% inflation rate, but still far above where we were at the start of 2021.

Energy prices, which were a big driver of inflation, slowed in August. According to AAA, a gallon of gas fell from $3.97 one month ago to $3.70 today. This is reflected in energy prices rising slower last month. The gasoline price index fell 10.6 percent over the past month, but the gasoline index increased 25.6 percent over the past twelve months and the overall energy index rose 23.8 percent over the past 12 months.

So, you’re very likely paying less at the gas pump than you were at the start of the summer. This may be a short-lived relief though. Treasury Secretary Janet Yellen is already warning that gas prices could skyrocket this fall due to geopolitical instability as G7 nations cut back on Russian oil.

Grocery costs go up, up, up

Food prices never slowed though but accelerated in August, rising at the fastest annual rate since 1979.

Food costs rose 11.4% at an annual rate–up from 10.9% in July. Food at home, such as groceries and household staples, rose a whopping 13.5% year over year.

Prices on different categories of food experienced remarkable year-over-year increases:

  • Cereals and baked goods +16.4%
  • Dairy +16.2%
  • Meats, poultry, fish, and eggs +10.6%
  • Fruits and vegetables +9.4%
  • Beverages (nonalcoholic) +13.4%

If it feels like your grocery bill rises each trip despite purchasing the same foods, it’s because you’re spending more to end up with the same or less. 

Groceries and gas or food and energy are highly volatile. Economists exclude their prices from those of other goods and services to get a better sense of how much prices are rising broadly. This rate is known as the core inflation rate and it rose 6.3% year-over-year in August, up from 5.9%.

Railroad strikes spell trouble for prices

There’s more trouble ahead for inflation. Prices on groceries and goods could spike further if tens of thousands of freight railroad workers go on strike this week. 

Two unions representing over 50,000 conductors and engineers say they will strike if they can’t reach a contract deal with rail carriers. The White House is taking this threat so seriously that it has been involved in the negotiations and is now working on contingency plans for moving hazardous waste as well as essential goods such as food, energy, and health products.

A tentative agreement was reached late last night, but if it falls through buckle up.

In anticipation of the expected strike, some freight companies started to limit services. 

Rail transport is incredibly important for the transportation of goods. Rail moves more than 40% of all long-distance freight in the U.S. according to industry experts.

A weeklong shutdown is projected to cause the loss of more than $2 billion per day according to the Association of American Railroads. It would take more than 460,000 additional long-haul trucks every day to offset the loss of rail capacity. We have a shortage of trucks already, this would be disastrous.

Unable to move food and goods by train, the supply chain disruptions will lead to shortages and price increases. Just when we thought the pandemic was over and things were getting back to normal.

Bottom Line

American households cannot escape rising food prices, even if they have received a little relief at the gas pump. For those with high incomes, inflation is annoying. Middle-class families are feeling the pressure on their pocket pockets. However, for low-income families, who spend proportionately more of their budgets on food and necessities, inflation is robbing them of food security. Concerningly, inflation may be set to take a turn for the worst.