Food prices and the inflation experiences of low-income households

Food prices have been rising rapidly over the past two years. In August 2008, aggregate food prices were 6.1 percent above their level in August 2007. Prices in August 2007 were already 4.8 percent above the level in August 2006. Because food purchases represent a larger portion of the expenditures of low-income households, these increases in price have a more substantial impact on the purchasing power of low-income households. This article describes the food inflation experiences of different population groups to demonstrate how different groups have been differentially affected by the recent run-up in food prices. In addition to spending more of their budget on food, lower-income households also concentrate more of their food expenditure on food consumed at home than higher-income households. Because the prices for food at home have been growing more rapidly than the prices of food away from home, this creates an additional gap in the impact of food inflation on lower- and higher-income households.