Grocery prices and gender roles affect inflation expectations : The Indicator from Planet Money Can you feel the inflation emanating from the milk aisle? Today on The Indicator, we explore how food prices – and who does the grocery shopping – affect how we think about inflation. Oh and don't forget your grocery list, because we're headed to the supermarket too.

Feeling inflation in the grocery store

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And I'm Adrian Ma. Today, the Federal Reserve raised interest rates by three-quarters of a percentage point. This continued the Fed's aggressive moves to try and bring down inflation, which right now is running at 9%.

WONG: Now, 9% is the headline figure you see everywhere, but economists tend to focus on a different measure of inflation called core CPI. That number is 6%. It's different from the headline CPI figure because it leaves out a couple of things that actually take up a big chunk of household budgets - gas and groceries.

MA: And out of those two categories, groceries are really where everybody feels the pinch of inflation - right? - unless, like, you're one of those people who doesn't eat food.

WONG: (Laughter).

MA: And that general feeling of getting hit by inflation - that is something that is really important to the Fed, and that is because of the way consumers feel about prices and where they're headed. Those feelings shape behavior, and that's called inflation expectations.

WONG: Econ vocab of the day - here's a classic example. If people believe inflation will be higher in the future, they'll ask for a raise at work. Companies then raise their prices to offset higher labor costs, creating a cycle that leads to more inflation.

MA: And this is why the Fed closely watches and tries to manage inflation expectations. They don't want anticipation of higher prices to actually become higher prices. And yet, economists' preferred inflation number - the core CPI - it ignores food prices.

WONG: So on today's show, we look at the very thing we're told not to look at - grocery prices. We stare right into this metaphorical sun to see how supermarket prices affect inflation expectations and why it matters who in the household actually does the grocery shopping.

MA: I should have brought shades.


WONG: There's a reason why core CPI excludes food and energy. Their prices tend to be volatile. They fluctuate so much that including them in CPI could paint a misleading picture of inflation trends that could maybe fool you into thinking that overall prices are going up or down more quickly than they actually are.

ULRIKE MALMENDIER: However, maybe unintended side effect of that has been that the measure of inflation we focus on does not reflect the reality we consumers live in.

MA: Ulrike Malmendier is a professor of economics and finance at UC Berkeley, and she says it just doesn't work to tell people to focus on certain prices and not others.

MALMENDIER: These daily signals we get - they just change us. They affect our brain. It doesn't even have to do with whether you were taught things or not taught things, how smart you are. And so by now, I know that it is of utmost importance to not, you know, talk down to consumers and try to talk them out of looking at grocery prices. If you want to understand what's going on inside and the decisions they will make, you have to take it super seriously.

WONG: And Ulrike - she did take grocery prices super seriously. A few years ago, she and some other economists came up with a couple new measures of inflation that focus just on grocery items. They tracked real-life prices by using Nielsen data that came from shoppers taking hand-held scanners to the grocery store.

MALMENDIER: We said, all right, let's focus on groceries. And moreover, let's, you know, use this very cool data we got and calculate, household by household, how prices for their items increased.

WONG: Ulrike and her colleagues also surveyed these Nielsen shoppers about their perception of past and future inflation - what do you think inflation was over the last 12 months, and what do you think it will be in the next 12 months?

MA: And what they found was a strong correlation between grocery prices and inflation expectations. So in other words, looking at changes in grocery prices - this category that does not appear in the core CPI number - it was a great predictor for inflation expectations. People were getting price signals beamed into their brains whenever they made trips to the supermarket, and that was driving how they felt about future price increases.

WONG: The researchers then dove in further to look at, OK, who's actually doing the grocery shopping in a household? Who is getting those price signals?

LAUREN SEEGERS: So I'm Lauren Seegers. I live in Oak Park, and I shop at Trader Joe's a lot.

WONG: In a lot of cases, it's folks like Lauren. The other day, I met up with her at a suburban Chicago grocery store.

SEEGERS: My husband - he hates grocery shopping. I actually like it.

WONG: Oh, OK. So you do it.

SEEGERS: So I do it.

WONG: She has a 1-year-old son who started eating solid foods just six months ago, so you can imagine how her bill has been growing.

SEEGERS: On my list today - let's see - we have avocados. I think I told you that he...

WONG: He goes through a pound of avocados in a week.

MA: That is a lot of guacamole.

WONG: (Laughter) Yeah. He's making it tableside, you know?

SEEGERS: And my sense at first was like, he's so small. How much can he eat? A lot (laughter).

WONG: That's, like, your only job at that age. It's just to, like, eat and be cute.


WONG: So Lauren is the primary shopper in the family, and that means she is very aware of how much groceries cost. Like, at Trader Joe's, she pays $6 for a big seedless watermelon. It feels steep, but it's not as much as the $12 watermelon her husband recently got at a different supermarket.

SEEGERS: Right. He came home, and I was like, take that back.

WONG: Did you really? Did he do it?

SEEGERS: I mean, he didn't, but...


SEEGERS: But that's so much.

WONG: Yeah.

SEEGERS: Still, $6 for this. I feel like this kind of a watermelon used to be, like, three...


SEEGERS: ...Right (laughter)?

WONG: Yep. Yep.

Lauren says it feels like the price of watermelon has gone up a lot. Now, take that feeling she has about watermelon and multiply it by the other items in her cart - avocados, organic milk, ground turkey. Then think about these feelings percolating in grocery stores all across the country. It's like a tidal wave of feelings that economist Ulrike Malmendier's research shows has a huge impact on inflation expectations - which, remember, could drive inflation higher.

MA: But do we all experience these feelings the same? One factor Ulrike has zeroed in on that seems to make a difference is gender. So there is historical data showing that women tend to feel more pessimistic about future inflation than men.

MALMENDIER: All sorts of hypotheses had been proposed for that. Oh, women have less financial literacy, less education. Maybe women are innately more pessimistic about the future of the economy. We thought, how about women being bombarded with these price signals from grocery shopping, but men, at least traditionally, not doing that so much?

MA: That is a good point. I mean, Ulrike and her colleagues drove back into her grocery research. And, remember, they've already discovered that grocery prices were a strong predictor of inflation expectations. Now, they were adding gender roles to the mix.

WONG: And here's what they found. First of all, within heterosexual married couples, there was a significant gender gap in inflation expectations. Wives consistently expected higher inflation than their husbands. Now, here comes the dramatic part - in households where men didn't grocery shop, this gender gap in inflation expectations almost doubled. And then, in households where the spouses shared grocery shopping more equally, the gender gap - it disappeared.

MA: Just poof - no more gender gap. So it's like this mundane household chore was hugely important for how people experience the economy and how they feel about it.

WONG: When you first saw the numbers, were you like, I got to run these again?

MALMENDIER: Exactly. No, that was exactly right. You can see there's been some noise in the answer. Maybe, you know, a man not wanting to admit that, you know, he basically never does the grocery shopping, or maybe a woman exaggerating, like, how much she does. But that's not the case here.

MA: It wasn't a matter of financial literacy or education level either. Basically, grocery prices were responsible for how women felt about future inflation. And women who were the sole or primary grocery shoppers in their households felt way worse about inflation than their partners.

WONG: Ulrike says teasing out how gender roles shape inflation expectations could go a long way in understanding the economic decisions that people make.

MALMENDIER: Think about labor supply - particularly if you have children, maybe, whether you stay at home - and that will be influenced by how you think prices and wages will increase in the future - how much you invest in your education, thinking about how much that will pay out. So really important decisions will be affected by these differences in expectations, and I think monetary policymakers understanding this is super helpful.


MA: Jerome Powell, if you're listening, maybe hold the next Fed governors meeting at a supermarket. You could get your weekly shopping done at the same time.

WONG: Yeah. Let us know how much a watermelon costs in Washington, D.C.


WONG: This episode of THE INDICATOR was produced by senior producer Viet Le, with engineering support from Debbie Daughtry. It was fact-checked by Kathryn Yang. Kate Concannon edits the show, and THE INDICATOR is a production of NPR.

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