Food at home prices—the cost of purchasing groceries for consumption at home—were down by a modest 0.2 percent in March compared to a month earlier, according to the latest inflation data, despite economic fears driven by the Iran war.
For the Trump administration, which embarked on the conflict in the Middle East without congressional approval, this is hardly good news. Inflation accelerated to its highest rate in nearly two years last month, with consumer prices climbing at the rate of 3.3 percent over the 12 months ending in March, up from 2.4 percent in February, the Labor Department said.
Why It Matters
The Iran war, which started on February 28 when the U.S. and Israel launched joint strikes on the Middle Eastern nation, has led to a de facto blockade of the Strait of Hormuz, where one fifth of the world’s oil normally transits, causing severe disruptions in the global oil market.
As a result, gas and diesel prices have skyrocketed all across the world, including in the U.S, where drivers are feeling the pinch at the pump. In March, according to the Labor Department, gas prices rose 21.2 percent from February, the biggest monthly increase since the government started tracking the figures in 1967.
Experts have warned that disruptions affecting the global energy market might soon spill over into other sectors—bringing up prices of everyday goods, including groceries.
What To Know
The latest consumer price index shows a complicated picture for food prices.
When it comes to food at home prices, four of the six major grocery store food group indexes declined between February and March, with the indexes for meats, poultry, fish and eggs, cereals and bakery products, and dairy and related products all falling 0.6 percent.
The index for eggs dropped 3.4 percent, while nonalcoholic beverages fell by a more modest 0.3 percent. Prices for fruits and vegetables, on the other hand, rose 1 percent month-over-month in March.
But in the same month, food away from home prices rose 0.2 percent compared to February. And looking at the bigger picture, there is no silver lining: even food at home prices were 1.9 percent higher than they were a year earlier.
Only two categories saw declines last month, the dairy and related products index (1.6 percent), and the meats, poultry, fish and eggs index (0.9 percent). Within the same 12 months, nonalcoholic beverages reported the largest year-over-year increase (4.7 percent), followed by fruits and vegetables (4 percent).
What Happens Next
While the U.S. and Iran have agreed to a conditional two-week ceasefire, fears of long-lasting economic damage and rising prices caused by the war continue.
Experts have warned that, while so far the conflict has affected gas and diesel prices the most, food, holidays, and even clothes could get more expensive in the coming weeks and months. That is because, when energy prices rise, the cost of powering farm machinery, warming up greenhouses, and transporting goods to supermarkets also goes up.
Fertilizer prices have also increased as a result of the Iran war. Much of the world’s fertilizer is produced in the Middle East and, normally, some 220,000 tons of nitrogen fertilizer pass through the Strait of Hormuz. The price of the most common nitrogen fertilizer, urea, jumped 54 percent from February to March, according to World Bank statistics, reaching $726 per metric ton. Farmers are likely to pass on this extra financial burden onto consumers.