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Get ready for higher grocery bills for the rest of the year

The latest spike in grocery bills comes on the back of prices that rose during last year's pandemic stockpiling — and never went down.
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Shoppers had better start budgeting more for their groceries, according to the latest consumer price index, which shows prices are increasing — and they're likely to keep going up.

The monthly consumer price index, released Tuesday morning by the Bureau of Labor Statistics, showed a 0.6 percent increase in March, the largest one-month increase in nearly a decade. Over the past year, prices have increased by 2.6 percent overall.

Gas skyrocketed by 9.1 percent last month. Since February, prices of fruits and vegetables have risen by nearly 2 percent, and the index for meats, poultry, fish and eggs has risen by 0.4 percent, according to the government figures.

The spike comes on the back of prices that had already risen during last year's pandemic stockpiling and supply chain disruptions and never went down. Consumers are noticing their inflating receipts.

Outside a supermarket in Long Island, New York, John Kermaj said he has seen prices rise in just the past two months.

"We used to buy this stuff for $30. Now it's $60," he said.

He has tried to adapt when shopping for his family by buying only essential items and avoiding name brands, but that means skipping meat and fresh fish.

"Gotta be the pandemic," Kermaj said. "Shortage."

Before the pandemic began, the national average for a pound of bacon in January 2020 was $4.72. By last month, the price had soared to $5.11, according to exclusive supermarket point of sale data from NielsenIQ. Ground beef is up to $5.26 a pound, from $5.02. Bread is up to $2.66 a loaf, from $2.44.

The hikes are more acute in certain areas. Boston and Philadelphia are paying nearly a dollar more per pound of bacon, while in Chicago it is up by about 70 cents. Several items spiked by over 5 percent at once in Dallas, including eggs, chicken breast, fresh ground beef and sandwich bread.

Changes at the checkout are also pressuring grocery profit margins. Manufacturers have cut back on promotions and coupons to moderate demand since the stock-up period in March last year.

"In a typical month, 31.5 percent of units are sold on promotion; in the most recent period of March, 28.6 percent of units were sold on promotion," Phil Tedesco, vice president for retail intelligent analytics at NielsenIQ, said in an email. "This has led to shoppers having fewer opportunities to take advantage of sales in the store," increasing total costs.

Economists say costs from rising gas prices, a spike in commodity prices, increased imports by China, heavy Midwest crop damage and other factors are all getting passed on to retail consumers.

"Supply chains are largely inefficient at this time," said Isaac Olvera, agricultural economist for ArrowStream, a supply chain management software company. "We're still dealing with fallout from the pandemic."

Gas prices and transportation costs that get passed on to consumers, especially for items like bread, are only going up as driving increases faster than oil production. So grocery prices are likely to remain on the higher end of estimates for at least the rest of the year, Olvera said. Producers may eventually increase their output to capture the heightened demand, but that won't happen until toward the end of the year, Olvera said.

The White House said Monday that it expects inflation to go up — and not go back down.

Three temporary factors are driving the increase, Jared Bernstein and Ernie Tedeschi, members of President Joe Biden's Council of Economic Advisers, wrote in a blog post: The rate of increase looks faster when it rises from a lower level, while supply chains have been disrupted and demand for services has built up.

"We think the likeliest outlook over the next several months is for inflation to rise modestly ... and to fade back to a lower pace thereafter as actual inflation begins to run more in line with longer-run expectations," increasing from "historically low to more normal levels," they wrote.

The price increases could stoke food insecurity at a time when more than 9 million people are out of work. The pennies can add up, week by week, family by family.

"Food is a necessity," said Jayson Lusk, a Purdue University agricultural economist. "Lower-income households spend a larger share of their income on food. When we see food prices increase, it affects lower-income households more."

Budget-conscious shoppers can try out some perennial advice for reducing their bills, with a couple of digital twists, said Amy Keating, a registered dietitian for Consumer Reports, a nonprofit consumer watchdog and publisher.

Keating recommends signing up for a coupon aggregator app like Flipp or a price-comparison app like Basket, which also includes online prices. Take pictures of items with their prices to help remember what the average prices are, especially for costlier items, like olive oil and nuts. And if the price sticker doesn't show the unit price, use your phone's calculator.

Other classic advice still works, like shopping based only on a list to avoid impulse buys, going for store or generic brands if they're less expensive and swapping pricier meats for cheaper cuts or downsizing to chicken or beans.

"We need to be a little bit more flexible if some of our favorites have become expensive," Keating said.

Outside the Long Island supermarket, Joanne Budhu said her family is adjusting their meals based on what they can afford in the store.

"We're not big meat eaters in our family," said Budhu, who noted that dairy prices have also gone up.

"So we try to cut back," she said. "We try to go in different recipes and ... substitute and not to cook that much stuff" that would be expensive.