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Chicago Fed Letter, No. 255, October 2008
Food Inflation and the Consumption Patterns of U.S. Households
Increases in food prices have been grabbing headlines recently. McGranahan investigates the expenditure patterns of different types of households to discover which households have been most affected by food price changes. She finds that food price increases have had a more dramatic effect on the purchasing power of low-income households than that of high-income households. This is largely because low-income households concentrate more of their total budgets on food and spend relatively more on food consumed at home. The findings that food inflation and total inflation were highest for food stamp recipients and low-income households have not been consistent over time. During many periods in the past 20 years, particularly when food inflation has been lower than overall inflation, the lowest income households faced lower food inflation and lower total inflation than the highest income households. However, low-income households have consistently dedicated a higher portion of their total expenditure toward food than high-income households.
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