Despite Higher Food Prices,
Percent of U.S. Income Spent on
Food Remains Constant
Annette Clauson
Over the past 2 years, U.S. food prices
have risen faster than at any time since 1990.
Prices for all food purchased in the U.S. increased
4.0 percent in 2007, up from the 2.4-percent gain
in 2006.
The U.S. Department of Labor’s
Bureau of Labor Statistics collects price data
for food purchased in
grocery stores and other retailers (food at home)
and food purchased at restaurants and other eating
places (food away from home). Together these two
categories are combined to determine the Consumer
Price Index (CPI) for all food. Prices for food-at-
home rose 4.2 percent in 2007,
while food-away-from-home prices increased 3.6
percent. In 2008, food- at-home prices are projected
to be up 5 to 6 percent, while prices for food
away from home are expected to rise 3.5 to 4.5
percent.
The jump in prices for food at home reflects relatively
large increases for staples such as milk, eggs,
vegetable oil, and bread. In 2007, retail milk
prices rose 11.6 percent, and egg prices were up
29.2 percent, while vegetable oil and bread prices
are expected to increase 9 percent or more in 2008.
Higher fuel costs for transporting foods to grocery
stores and restaurants also contributed to rising
food prices.
The average U.S. consumer spent 9.8 percent of
disposable personal income (income available after
taxes) on all food in 2007—5.7 percent on
food at home and 4.1 percent on food away from
home. The percentage of disposable income spent
on all food, food at home, and food away from home
remained constant from 2005 to 2007.
Although food prices rose at an accelerated rate
in 2007, Americans overall still spent less than
10 percent of their disposable income on food.
Between 1970 and 2005, the percentage of disposable
income spent on all food fell from 13.9 to 9.8
percent on average. This drop occurred because
prices of other consumer goods outpaced the price
of food, and incomes rose at a faster rate than
food prices. Disposable personal income increased
5.7 percent in 2007, after increasing 5.9 percent
in 2006.
Government surveys indicate that lower income consumers
spend a larger share of their available income
on food than middle- or higher income consumers.
Data from the 2005 Consumer Expenditure Survey
indicate that households earning $10,000 to $14,999
a year, before taxes, spent an average of 25 percent
of their income on food. Households earning $15,000
to $19,999 a year, before taxes, spent 19 percent
of their income on food in 2005. The recent accelerated
increase in food prices is likely to result in
lower income households spending an even greater
share of their available money on food in 2008.
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