Economy: Rising Grocery Prices Are Changing How Americans Shop

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0:21For some of you, getting food on the table has become a struggle. My name's Amy and I live in California. You wouldn't believe how much a normal grocery store costs here with perhaps a box of crackers being$5 to$6. I've been eating some expired food, technically expired. I tried to get by with going to a United for Poverty grocery store and cheaper grocery stores. I have become vegetarian. I don't eat meat anymore. I pretty much don't eat cheese anymore. I have been really struggling with the cost of groceries. I don't really buy meat products anymore. I might eat meat one time a week, and I really just limit myself on what I'm buying.

1:15So instead of buying a whole bunch of bananas, I'll buy one at a time. Thanks for those messages. Grocery prices are up 33 percent since 2019, and the seven and a half years before that, prices only rose around 6 percent. That's according to federal data analyzed by the Associated Press. It's led some people to change their diet or where they shop. Others are taking more drastic measures by dipping into their savings or going into credit card debt. Last year, more than a quarter of people using credit cards to buy food had trouble paying those debts back. That's according to a new report from the Urban Institute.

1:50I'm Jen White. You're listening to the 1A Podcast. What's behind the jump in grocery prices? How is it affecting your budget? And how is all of this affecting our economy as a whole? We'll get into it all right after this. Stay with us.

2:08This message comes from NPR sponsor Charles Schwab. Financial decisions can be tricky. Your biases can lead you astray. Financial Decoder, an original podcast from Charles Schwab, can help. Download the latest episode and subscribe at schwab.com slash financial decoder. This message comes from Bombas. Bombas compression socks help keep legs fresh on travel days, work days, leg days, and more. That's all day relief with everyday style. Go to bombas.com slash NPR. Support for this podcast and the following message come from Dataiku. AI agents are transforming how enterprises work. The problem is many operate in secret.

2:51The right people rarely know what their agents are doing, if they're doing it right, or that they even exist at all. Dataiku gives companies one place to see, control, and measure every agent across the entire business. Visit dataiku.com slash NPR. That's D-A-T-A-I-K-U dot com slash NPR. are. Let's turn to our panel. Joining me here in studio is economist Jarrett Bernstein. He chaired President Biden's Council of Economic Advisors. Now he's senior fellow at the Stanford Institute for Economic Policy and the Center for American Progress. That's a progressive think tank in D.C. Jarrett, welcome back.

3:30Great to be with you. Also joining us is Michelle Singletary. She's a personal finance columnist at The Washington Post. She's also the author of What to Do with Your Money When Crisis Hits, A Survival Guide. Michelle, it's always great to have you. Oh, thanks for having me. And Cassandra Martinchak is a senior research associate at the Urban Institute, focusing on wealth, financial well-being, food, and nutrition. The Urban Institute was founded in 1968 by President Lyndon B. Johnson to evaluate and help develop public policy programs. Cassandra, welcome. Hello, hello. We got this from one of our text club members.

4:04Prices rise over time. That's inevitable. I've always tried to save on groceries, even though my salary is sufficient for a comfortable life. I find that I'm spending extra time looking for deals lately. Prices on some items have almost doubled, and there's some sticker shock associated with each trip to the store. Jared, help us understand how big of a spike people are experiencing in their food costs right now. So the spike that you mentioned in the introduction, you said food prices were up 33 percent, I think, since pre-pandemic, something like that. That's historically, to use the technical term, crazy big.

4:43That is a very large spike relative to history. In the five years before the pandemic, grocery prices happened to be flat. That's pretty unusual. They typically grow around 1 to 2 percent per year. Most recently, they've been elevated from that. The most recent read is just under 3%. So people have two problems. One is that the level of grocery prices really jumped, and it stayed up there. Remember, I used to be in the White House going on TV to talk about this stuff, and I would often say, guess what? Inflation is lower. Grocery prices, inflation peaked at 13%, and I'd go out there on the White House North Lawn and say, last seen it was 2 % or 3%.

5:23people were like, well, that just means my prices that are already too high are rising more slowly. I want them to come back down. A lot of people remember what things used to cost, and they want their old prices back, and they haven't gotten them. So I think the spike is big, it's real, and it's very intensely felt by a lot of consumers. Well, we're hearing from many of you about your grocery prices right now. My name is Jason. I live in Boynton Beach. and going into debt just to buy food. That's exactly what we're going through right now. We're probably gone into about$30 ,000 in credit card debt, and now it's getting to the point where we can barely pay our rent every month just between the expenses for everything, the cost of food, the cost of gas, the cost of everything, and we're drowning.

6:16Cassandra, we mentioned the Urban Institute report that you co-authored. Talk us through what you learned about how people are using credit cards to buy food? Yeah. So in our report, we look at how many families use different payment strategies to afford groceries. And we know a lot of consumers use credit cards to purchase food for their families. There's a lot of benefits. You can get credit card rewards. It's easy to chunk up your payments. But what we found was one in four working age adults use credit cards to purchase groceries for their families and experience repayment challenges. So they didn't make the minimum payment or they carried over a balance.

6:53So in this case, they're accruing debt in order to pay for the food that they need for their families, which can have both short and long-term consequences as families need to now in the future both repay the debt that they've accrued that they've put on their credit cards, as well as pay for the current basic needs that they have. And then if this persists for a while, it can tank their long-term credit worthiness, which can make it harder to get connected to work, to get connected to housing opportunities if credit checks are used in those processes, or participate in wealth building. So this can be quite consequential.

7:29Michelle, we talk about credit card debt with you quite a bit. And what are you finding about how people are turning to credit cards for groceries, but also how that's connected to other affordability issues in their lives? Yeah, well, you know, when your pay can't stretch for everything. You reach for credit. Oftentimes when we talk about this, some people right away go, well, people are going on vacations or buying a bunch of clothes. And while there are some people doing that, the vast majority are just trying to make ends meet. And so if you've got, you know, rent is up. So one whole paycheck is for housing.

8:08That leaves you having to try to carve out that second paycheck if you get paid twice a month for groceries and gas. And if you've got kids, childcare. I mean, you throw childcare in the mix and it just explodes. And so what I see, because I work in my community, I work with individuals. I see that this is a compounding problem. They started out, maybe they lost their job. They use credit, even though they may have now gotten a job, they're still digging their way out. And so when prices rise, they've got this old debt, they've got new debt, and then the rise in prices. And as you can see, that hole that they dug, they can't get out of.

8:49We got this email from Jay who says, I was an economist with the U.S. Treasury, Commerce, and Homeland Security departments for decades. President Trump has raised food prices in three key ways. First, his tariffs have boosted food prices directly and indirectly. Second, the Iran war has also increased food and fertilizer prices. Third, his immigration policies and deportations have shrunk our agricultural workforce, also boosting farmers' costs and decreasing their output. Jared, what do you make of Jay's analysis there? It's 100 % correct. There's a couple of things I'd add, but before I get to that, let me just say that when Michelle was talking, I thought about the old adage, The rent eats first.

9:28That's true. And if we look at pressures, you and Michelle and others here are correct to break this out holistically because the grocery price thing is a true stressor for consumers. I'd say probably the most prominent prices people see in the economy are gas and groceries because we see them numerous times per week. But, you know, every month you've got that rent. So anyway, Jay's analysis is spot on. And I've seen work that suggests the policies that he mentioned, tariffs. Some of our food is imported. But even more importantly, many of the inputs to food production are imported. So the diesel price, I looked at it this morning just so I'm up to date, is up 43 percent since the war began, since the war in Iran began.

10:17Ninety percent of our food is delivered by trucks and most trucks run on diesel. So that's correct. The only other thing I'd add to Jay's correct list, tariffs, the war, deportations, which hurt on the labor side, is that there have been some supply shocks, some supply problems in the sector itself. Beef in particular has seen droughts, have seen food, feed issues, and herds are at an historically low level. So that's added insult to injury in that space. Now, President Trump does cite the falling prices of some grocery items, including avocados and berries. He did that in a post on Truth Social in May saying he's making food affordable.

10:56When you look at the big picture, we talk about how much presidents actually shape the economy. How much can a president influence grocery prices? Not very much at all. It's actually a really important question. There's not that much a president can do on grocery prices, especially in the very near term. Now, over the longer term, and interestingly, when I was in the Biden administration, we did this, and the Trumpies have done a similar thing. there are some congestion in the upstream part of food production. For example, meat production is quite concentrated as an industry. There's not enough competition there.

11:31So there needs to be more, but that's the kind of thing that might help you, you know, a year or two down the road. In the near term, I just don't think there's too much a president can do. Now, just one thing, do no harm should be a first principle. And this president has cut the food stamp allotment quite significantly and done all the things that Jay just took us through. So actually, in this case, there's a fair bit that a president could do. We'll talk more about cuts to SNAP benefits in a minute. We're also hearing from you. A member of the 1A Tax Club writes, as a senior citizen, it is becoming increasingly difficult to maintain the level of food quality I had back when I was working full-time.

12:10Fresh produce, which is far better than processed food, is especially more difficult to fit into my food budget. And another of you shares, I barely eat any fresh food because it's hard to find at a decent price anymore. I feel my health declining from eating so much processed, cheap food. Coming up, Americans turn to buy now, pay later options for groceries, and we'll talk more about federal SNAP benefits. We'll be right back.

12:37This message comes from NPR sponsor Charles Schwab. Financial decisions can be tricky. Your biases can lead you astray. Financial Decoder, an original podcast from Charles Schwab, can help. Download the latest episode and subscribe at schwab.com slash financial decoder. This message comes from Bombas. Bombas compression socks help keep legs fresh on travel days, work days, leg days, and more. That's all-day relief with everyday style. Go to bombas.com slash NPR. Support for this podcast and the following message come from Dataiku. AI agents are transforming how enterprises work. The problem is many operate in secret.

13:21The right people rarely know what their agents are doing, if they're doing it right, or that they even exist at all. Dataiku gives companies one place to see, control, and measure every agent across the entire business. Visit dataiku.com slash NPR. That's D-A-T-A-I-K-U dot com slash NPR. The midterms are coming, and that means the news cycle, which is already intense, is about to get more intense this fall. So this summer is a perfect time to make sure your news diet is calibrated. I'm Leila Faudil. On Up First, we unpack the three biggest stories every morning so you can stay informed and get on with your day in less than 15 minutes.

14:02Follow or subscribe to Up First today wherever you get your podcasts. Back to how you're dealing with the cost of groceries. We sent 1A producer, Thomas Liu, to a grocery store in Washington, D.C. to hear from some of you. Last year, I remember saying groceries were expensive, but I never thought paying$7 for apples is a new normal. I never thought paying$6 for a dozen eggs is a new normal. And I remember a few years ago,$100 used to mean, oh, you fill your car up with groceries, and now$100 is like you just get a few items. So I think grocery prices are outrageous. On a pretty regular basis, I normally am on a routine of how much I spend.

14:43I'm like transferring money out of savings just so I can buy my groceries, which I wouldn't normally do. That's Chris and Rebecca sharing their experience buying groceries in Washington, D.C. Cassandra, we heard there from Rebecca that she's tapping into her savings to afford food. And this is something you found in your survey with the Urban Institute as well. Tell us more. Yeah, nearly one in five working age adults reported paying for groceries with savings that they didn't intend for daily expenses. This means that they're taking money out of savings that was earmarked for maybe putting toward a down payment or for their children's education or, you know, it's back to school season purchasing backpacks for their children.

15:26And so savings can be a really helpful short term strategy to cover budget shortfalls. But when you deplete savings for daily expenses, it can create risk later on if you're not able to recover those savings. And it means you have less buffer when future financial emergencies arise. Or it can be harder to maintain any of that buffer if it's a consistent income shortfall that folks are facing. Well, you also found that nearly 1 in 10 people are using buy now, pay later options to buy groceries. And this is basically what we used to call when I was a kid layaway, where you sort of pay on something gradually.

16:05And I think people often think about those options if you're buying maybe an appliance or a big electronic piece like a television or maybe even clothes. But we're talking about food. What did you find? Yeah. So more families are using Buy Now, Pay Later to finance groceries. And so buy now, pay later options can provide families with financing without a traditional credit check. It allows you to split payments for purchases. But, of course, use of these products can signal that families are overextending their finances. And if they miss payments, they can still accrue late fees, interests, or they may overdraft their bank accounts.

16:47So what we found was one in four working age adults use Buy Now Pay Later to pay for groceries, and among them, one in three missed a payment when they did. A LendingTree survey from July found that 44 % of Americans expect to apply for one of these Buy Now Pay Later loans in the next six months, while 13 % expect to take out three or more in that time frame. Michelle, when we talk about these loans or the accrual of credit card debt, what concern do you have around people building this debt to pay for food? Mary writes the biggest problem is interest. So when you, you know, do you pay now, buy now, pay later?

17:32Lots of times people don't realize they're taking on more than just one. And so at the moment, it seems like the math works, right? You split your groceries into four payments. It makes it a little easier. Except then the next week, you've got to take out another one, and you're paying four more or three more payments on the one that you took out. So you can see the snowball impact of using the credit, using buy now, pay later. And then people are using payday loans. Urban Institute looked at the increase of people using payday loans, which are horrible, horrible products. If you don't have the money in your current paycheck, how are you going to have it in the next one for the bills that are coming that you need to pay in the next one?

18:14And that is my concern. And I don't want to put it on the individual because there's so much pressure. They're doing the best they can. They're using these products that were introduced to them and thinking that the math might work eventually. But what Cassandra pointed out is that that's the problem. If you're dipping into your savings that you would use if you lost your job, then you lose your job. You don't have savings. And now you've got the debt to attend to as well. And that's what scares me. And specifically around this question of interest, when we're talking about credit cards or payday loans, how can that exacerbate financial insecurity for families?

18:54Oh, my gosh. It's a debt trap for decades. I mean, you know, the average credit card interest rate is 20%. And when you talk about this population that is already stretched, their interest rates could be as much as 30%. You know, payday loans, it looks like it's a small fee, like$15 for every hundred that you borrow. But when you annualize it, it's like, you know, four figures, like thousand percent interest. And so that$15 could buy you a carton of eggs and some milk, right? And so that is the problem with these products that they introduce the folks, say, hey, you know, we're trying to help you out.

19:28we're going to introduce these new products. But really what it does is put you in debt for decades. We got this from another member of our tax club. Just when my family was doing well financially, the rising prices have crushed our finances. We've stopped traveling, cut back on other purchases, and are making changes to try to protect any financial gains we made over the past decade. And another of you writes, our groceries are up 32 percent and we already shop at discount stores. Our electric bill is also up 30%. My 3 % raise isn't going to make up for this, so less money is going into my retirement investments.

20:02And that's an important thing to note here, Jared. It's wages. That's so interesting that you raised that, Jen, because I invented a statistic for our show today. Okay. You can call it the 1A number. Okay. I took the difference between wage growth and grocery price growth. Okay, so how much faster are wages growing relative to the price of groceries? And if you go to December 2019, that number is 15%. Wages outpaced grocery prices by 15%. If you go to January of 2025, that number had shrunk to 6%. Wages were only outpacing grocery prices by 6%. You go to the most recent number from last month, down to 3%.

20:47from 15 % before the pandemic to 3 % now. What your callers are telling you is completely verified in these numbers. People's paychecks, they might be beating the grocery prices I've just shown you, but by a tiny margin compared to what it was before people were talking about these stressors. So I think this part of the equation is just as important as the price side. And how do you contextualize that with the other costs of maintaining a household? Because it's not just food. There's housing prices. There's the cost of energy, electricity, gas. If you have kids in school, there are – health care.

21:27I contextualize that by putting it under the rubric of something I've talked about from this very chair before, which is the affordability crisis. What we're talking about today is one corner, a very important, a very visible corner of that crisis. But this is something that is well understood across America, and our politics is reflecting it as well. Now, on alternate days, the president will dismiss this as a faux, you know, just a made-up thing. But, of course, it's real, as we've been discussing, and at least the political class is aware of it. We can have another discussion about whether they're doing anything.

22:01But that's, to my view, the appropriate rubric, is this is part of the affordability crisis. Paul writes, it's not just those who are low-income who are changing their habits. We used to go out to nice restaurants more, but now we go to cheaper restaurants and eat at home more. For groceries, we focus on the discount stores and BOGO sales. Cassandra, what are you seeing across the board? So not just people who are lower income, but families that fall under the middle class umbrella. How is spending changing for families across the board? Yeah, we're seeing evidence that both low - and moderate-income families are experiencing repayment challenges when they're affording groceries, right?

22:42More than half of moderate and low-income working-age adults who use credit cards to buy groceries took on debt for their families. But interestingly, also one-third of higher-income working-age adults use credit cards to purchase groceries for their families and experience repayment challenges. So while it's more stark for families with low and moderate incomes, it's also affecting those with higher incomes as well. And for moderate and lower income families, groceries are a really substantial part of their household budgets. For moderate income families, it's about 12 percent of their overall pre-tax income.

23:19So when you're experiencing these upward price pressures, you don't necessarily have a simple release valve because it's taking up so much of your household budget. And we're also seeing evidence that for the moderate income families as well, they're experiencing a greater risk of experiencing food insecurity over the past year as well, meaning they're changing how much they're purchasing, the nutritional quality of the diets that they're consuming. And so the pressure is not just showing up in terms of how they're paying for groceries, but also their food security status, which has implications for their health as well.

23:55We'll hear from the head of the Houston Food Bank a little later in the show. But, Michelle, when you hear those numbers, what does it say to you about Americans' financial stability right now? Not just in the next three to six months, but when you think longer term as well. It breaks my heart, to be honest, Jen. And, you know, we're talking numbers, but I see the numbers with real people. I'm sitting across looking at their budgets. And Cassandra made a great point that I hope people don't miss. When you are using these products and making these choices, you heard a lot of callers say that they're switching how they eat.

24:36And so if you're buying more processed food because it's cheaper, that's not good for your health. And so that means that you didn't have health challenges, diabetes and things like that. And so then what happens, particularly this administration, They're cutting back, you know, in terms of the subsidies that they help to help people pay for health care. If you are borrowing to borrow for your groceries, you can't save to send your kid to college. So then you take on more college student loan debt, which then buries you and your child into debt for decades. If you can't pay for your groceries, you have to put it on a credit card.

25:14than when it comes time for you to rent an apartment or house, then you have more of your income going towards that because you can't put a larger down payment on your house. And you can see how the cycle of wealth building, all of us should be concerned about that. If you're doing well and you're listening, you go, oh, those are those problems over there for those people. But it impacts our economy. If we don't have people able to live a decent life and not be buried in debt, They can't contribute to the growth of the economy. And then more of our tax dollars have to go to help care for them.