C.J. Lawrence Weekly – Talking Turkey – Deflation at Dinner

The recently released Producer Price Index (PPI) and Consumer Price Index (CPI) diverged in their October readings. The PPI rose to an annual rate of 2.8%, the highest annual rate since February of 2012. The CPI, on the other hand, barely rose for the month, and the annual rate bumped down to 2.0% from 2.2%. Most economists believe the CPI reading was more heavily influenced by the impact of fall hurricanes than was the PPI. The index readings are growing in importance as we approach the December meeting of the Federal Reserve’s Federal Open Market Committee (FOMC). Both are weighed heavily in the FOMC’s calculus of price stability and full employment, and ultimately in their monetary policy decisions. But while the direction of the data tilts towards inflation, Americans are experiencing deflation at the Thanksgiving dinner table!

This week, a vast majority of Americans will join together for the time-honored tradition of the Thanksgiving dinner. While many will disagree on politics, the appropriateness of Uncle Joe’s humor, and the dinner table seating arrangements, the overwhelming consensus is that turkey, with all the trimmings, is the mainstay of the Thanksgiving feast. The cost of that feast is projected to be down 1.5% from last year, according to the American Farm Bureau Federation survey. On average, a dinner for ten, consisting of a 16-pound bird, and all the trimmings comes in this year at $49.12. The cost of the dinner is the lowest since 2013, and the second-lowest since 2011, according the Farm Bureau’s director of market intelligence.

The big-ticket item, a 16-pound turkey, will cost American families $22.38 or $1.40 per pound. That’s a decrease of 2 cents per pound when compared to 2016. The shopping list for the Farm Bureau’s informal survey includes turkey, bread stuffing, sweet potatoes, rolls with butter, peas, cranberries, a veggie tray, pumpkin pie with whipped cream, coffee and milk, all in quantities sufficient to serve a family of 10. The Thanksgiving dinner menu has remained unchanged since 1986 to allow for consistent price comparisons. Foods showing the largest decreases this year in addition to turkey were; a gallon of milk, a dozen rolls, two nine-inch pie shells, a 3-pound bag of sweet potatoes, a 1-pound bag of peas, and a group of miscellaneous items including coffee and ingredients necessary to prepare the meal. Despite healthy supplies, prices for cranberries and cranberry sauce (a CJL favorite) rose in this year’s survey. Perhaps Amazon has not yet figured out how to disintermediate a cranberry bog! On behalf of the C.J. Lawrence team, Happy Thanksgiving to all!

Full Disclosure: Nothing on this site should be considered advice, research or an invitation to buy or sell securities, refer to terms and conditions page for a full disclaimer.

Terms and Conditions