ASU economist discussed the impact of inflation in the state
Feb. 1, 2022
Inflation is becoming an increasing concern as prices for gas, food and other goods are up significantly over a year ago. Arizona Horizon’s Ted Simons discussed the impact of the inflation of prices with ASU economist Dennis Hoffman.
If you’ve been to the grocery store lately, you’ve probably noticed the increase in food prices. New research shows that prices of meat, seafood, produce, cereal and other foods shot up 9% in 2021. Consumers have been experiencing sticker shock at the checkout, and we wanted to find out if there was any relief in sight.
Ted Simons spoke to economist Dennis Hoffman, the director of the L. William Seidman Research Institute at the W. P. Carey School of Business at Arizona State University.
“The meats are very high,” said Hoffman, referring to food prices. “Some of the basic commodities… The determinants there are weird things like transportation, packaging. You know, obviously, demand of these products is up.”
Experts say several issues are to blame.
Experts agree that the supply chain, the ongoing labor shortage and the pandemic are to blame. The number of cargo ships off the California coast was at a record high in January. And then the costs of labor, fuel, ingredients, packaging, and transportation keep skyrocketing, driven largely by the worker shortage and a massive spike in demand for goods. “Getting products to the shelves to serve consumers is tough in an era when there are not as many transport drivers as there used to be, supply chains are simply not working like they used to, and packaging is not available like it used to be, and that’s what we face,” Hoffman said.
In the past, making meals at home was considered to be cheaper than going to restaurants. But according to one report, the cost of eating at home is climbing faster than the cost of dining out, even though many restaurants have been forced to raise menu prices.
Hoffman tells us inflation is showing up not just in grocery prices, but in other cost-of-living expenses, like housing, used car prices and fuel. The Federal Reserve has indicated that it will begin a series of interest rate hikes in March, which could help the situation.
Hoffman tells us that part of the problem is the way the U.S. handled the pandemic “We didn’t get people connected to their employers like Europe did,” said Hoffman “We fired everybody. Laid them off all, then they go to the government and collect.”
Hoffman says the housing and auto markets are big contributors to Arizona’s inflation rate.
We asked Hoffman how long grocery prices might stay high. “I think it’s relatively temporary,” he said. He told us he expects things to improve by the later part of this year.