A Consumer Shopping in a Supermarket Photo: The Africa Report

CPI: Why consumers are facing higher prices almost everywhere ─Report

*Economists in a survey found the pandemic-related supply chain issues are driving inflation, including large price increases for bread, snacks, beef, pork, and poultry which consumers are witnessing at supermarkets and other retail outlets, prompting some to switch brands

Isola Moses | ConsumerConnect

In most economies across the world, the governments issue monthly Consumer Price Index (CPI) as a measure of inflation that consumers encounter when they shop.

However, behind those numbers, some sectors of the economy are feeling especially sharp price increases, a report has revealed.

Photo: FT

In the United States (US), for instance, the price of bacon has nearly doubled over the last 10 years, with much of that increase coming since the start of the pandemic, said the report.

Accordingly, a White House report was said to have blamed part of the increase on a lack of competition in the meatpacking industry, which officials say is affecting other meat prices in the country as well.

The report said: “Large price increases for beef, pork, and poultry are driving the recent price increases consumers are seeing at the grocery store.

“Together, these three items account for a full half of the price increase for food at home since December 2020. Since that time, prices for beef have risen by 14.0%, pork by 12.1%, and poultry by 6.6%.”

Effects of global supply chain challenges

Economists say the nagging supply chain issues caused by the COVID-19 pandemic also play a large role in rising prices in economies around the world in recent times.

When it reported earnings this week, for example, food and beverage conglomerate Pepsico said supply chain bottlenecks were affecting wide areas of its business.

Pepsico’s Chief Financial Officer Hugh Johnston, in an interview with Reuters, said the company was scrambling to deal with a shortage of aluminum cans and Gatorade bottles. Johnston disclosed there was greater demand for these products as restaurants and theaters reopened this year, but supply chain constraints made it hard to meet that demand.

Pepsico’s costs rose as a result, and Johnston said he feels confident that those higher costs will be passed along to consumers.

He also noted: “I do expect there will probably be some price increases in the first quarter of next year as well, as we fully absorb and lock down the impact of commodity inflation.”

Same prices, smaller products vs. higher prices, same products

ConsumerConnect checks in a number of retail outlets in Ikeja, Lagos, and some parts of Ogun State, in Nigeria, also revealed that several manufacturers/producers of consumer goods have resorted to reduction in sizes of their major products in the markets.

The relatively long wait for cooking gas in Nigeria

Findings revealed the obvious shrinking sizes of several products are especially noticeable in bread, cosmetics, snacks, beverages, and other daily household needs among others.

Whereas other consumers sometimes encounter inflation when the prices of products remain the same but they get less products in terms of value for money.

This scenario also plays out a lot with regard to packaged food products like breakfast cereal; in some cases, 12 ounces may be reduced to 10 ounces in some other economies.

Kim Sovell, a Marketing Professor at the University of St. Thomas in St. Paul, Minnesota, says consumers are likely to encounter the practice even more in the months ahead, especially if higher costs remain a permanent fixture.

Sovell told WCCO-TV in Minneapolis, that “it’s really a way to conceal higher prices. We’re very deterred by price increases.

“We’ll switch brands. We check prices every time we shop but we rarely check weight.”

Consumers are already braced for higher heating bills this winter as a result of surging energy prices.

Soaring prices of cooking gas

Natural gas prices doubled in six months and rose 17 percent September 2021 alone.

Likewise, Nigerians are not exempted from the rising prices of the product either. Checks indicated that consumers of the Liquefied Natural Gas (LNG), otherwise known as cooking gas have been battling with soaring prices of the product across the country of late.

For instance, a 6kg cylinder of gas goes for N3,800 while a 12.5kg cylinder of cooking gas is sold for as high as N7,500 at most retail outlets, report said.

In the Western world, however, consumers heating their homes with electricity will also feel the effects of more expensive natural gas this winter, report said.

Most electricity generation plants are powered by gas, and industry analysts have projected that the blisteringly hot summer increased natural gas demand to keep homes and businesses air-conditioned in such lands.

Shell gas station in the US  Photo: The NewsWheel

Report as well noted that utilities currently pay a little over $5 per 1 million British thermal units.

For consumers heating their homes with gas, that roughly translates into twice the cost of last winter’s heating bills.

In the US, report also said that gas prices make their biggest one week jump of the year.

After being stable for more than two months, the price of gasoline reportedly moved sharply higher in the last week, hitting its highest level in seven years.

AAA’s daily price tracker shows that the national average price of regular gas is $2.26 a gallon, seven cents a gallon more than Friday, October 8, 2021. It’s $1.09 a gallon more than a year ago.

The average price of premium gas is $3.86 a gallon, five cents a gallon more than a week ago. The average price of diesel fuel is $3.43 a gallon, 10 cents a gallon more than last week.

Oil prices have moved higher in the last month as the world finds itself in a growing energy crunch.

Patrick DeHaan, Head of Petroleum Analysis at GasBuddy, disclosed that prices are moving higher despite relatively low demand.

He predicts that the national average price of regular could hit $3.30 a gallon next week.

Andrew Gross, AAA Spokesperson said: “Global economic uncertainty and supply chain concerns caused by the lingering COVID-19 pandemic could be playing a role in keeping crude oil prices elevated.

“But, there may be some relief on the horizon due to the news that OPEC and its allies might ramp up production increases faster than previously agreed.”

However, there was no sign of that relief during the week, as practically every state saw price increases in the United States, report said.

The statewide average jumped 15 cents a gallon in Kentucky, nine cents in Tennessee, eight cents in Alabama, seven cents in Missouri, six cents in Arkansas, and five cents in Oklahoma, Mississippi, and Texas.

It was learnt states with the most expensive prices for regular gas, according to AAA are: California ($4.43), Hawaii ($4.12), Nevada ($3.88), Washington ($3.85), Oregon ($3.74), Idaho ($3.73), Utah ($3.71), Alaska ($3.69), Colorado ($3.53) and Wyoming ($3.51).

Yet, there is no guarantee that consumer prices will not go even higher in months ahead, according to analysts.

Additional reporting by Gbenga Kayode

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