Rising prices are on the menu for Thanksgiving, with inflation currently at 7.7%
As Americans prepare to gather for Thanksgiving, the high cost of both turkey and travel is grating on their sense of gratitude. At many family get-togethers this month, inflation will be on the menu.
Wholesale turkey prices have jumped 23% from a year ago, gobbling up a big chunk of the holiday budget. Potatoes and cranberries are more expensive as well.
"We haven't caught a break yet," says Michael Swanson, lead agricultural economist at Wells Fargo.
High energy costs, labor shortages, challenging weather conditions and avian flu have combined to push the cost of a Norman Rockwell Thanksgiving through the roof, he's found.
Grocery prices in October were 12.4% higher than a year ago, according to a report from the Labor Department released on Thursday. That outstrips the overall inflation rate of 7.7%.
Polls showed inflation was a top concern for voters heading into this week's midterm elections.
Swanson says that while some families might try to cut their food bill by shopping at discount supermarkets or switching to less-expensive store brands, he doubts many will scrimp on the big holiday meal.
"People will eat what they want to eat on Thanksgiving," he says, and make adjustments elsewhere in their budgets.
Likewise, millions of people are paying a premium to see distant family members this year. Airfares declined slightly in October from the previous month, but are still nearly 43% higher than they were a year ago. Nevertheless, planes are still packed.
"Travelers are resilient," says Haley Berg, lead economist for the travel booking app Hopper. "Thanksgiving and Christmas travel to see family is considered essential by many, and something they won't compromise on, even when there are higher prices."
For some families, this holiday season might be the first opportunity for a reunion since the beginning of the pandemic.
"Keep in mind that in November and December of last year, we had the delta and omicron waves of COVID, which caused mass cancellations and many travelers to change their plans at the last minute," Berg says.
Travelers who need to rent a car may find some savings. Rental prices are 3.5% lower than they were a year ago, when rental car companies were still struggling to rebuild their fleets.
"There's been relief on the supply side," Berg says. "Car rental companies [have been] bulking up the number of cars they have available."
Looking toward a post-holiday debt hangover
With prices climbing faster than incomes on average, some people are digging into savings to help cover expenses. Others are relying on credit cards, even though it's getting more expensive to carry a balance.
The average interest rate on credit cards now tops 19%, according to Bankrate — up from 16.3% at the beginning of the year.
"It's really all about the Fed," says Ted Rossman, senior industry analyst at Bankrate. He notes that borrowing costs on credit cards have risen steadily as the Federal Reserve has raised interest rates at the fastest pace in decades.
Since March, the central bank has raised its benchmark rate by 3.75 percentage points. Rates are likely to go even higher, as the Fed tries to tamp down demand and bring inflation under control.
"The most important point for consumers is: your [credit card interest] rate is way up," Rossman says. "It's probably going to go up more. So it's more important than ever to pay down this debt."
In general, Americans are not following that advice. The outstanding balance on credit cards and other forms of revolving debt rose nearly 13% in the summer and early fall, according to the Federal Reserve.
"Despite all the worries, people are spending aggressively," Rossman says. "I think the holiday season factors into this as well."
He notes that so far, delinquencies and defaults on credit card debt are well below historical levels. But Rossman thinks consumers' willingness to keep paying higher prices may be reaching its limit.
"I think there's going to be a lot of post-holiday debt hangovers," he says. "A lot of sticker shock in January, unfortunately."
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Transcript
STEVE INSKEEP, HOST:
Democrats endured this week's election, largely, despite being weighed down by continued inflation. And we have some news about inflation today. The annual rate appears to be falling a bit. The Labor Department issued its report for the month of October, and NPR's Scott Horsley is covering that. Scott, good morning.
SCOTT HORSLEY, BYLINE: Good morning, Steve.
INSKEEP: What are the numbers?
HORSLEY: The annual inflation rate in October was 7.7%. That's down a bit from the 8.2% annual rate in September. And the monthly price increase between September and October was smaller than forecasters had expected. That has investors cheering this morning. Stocks rose sharply at the opening bell. Shoppers at the grocery store are still seeing very high prices, though, two weeks out from one of the big eating days of the year.
INSKEEP: Yeah.
HORSLEY: Grocery bills are up 12.4% from this time last year. The report on inflation doesn't break out the cost of turkey in particular, but we know wholesale turkey prices this fall were up about 23%. That could gobble up a lot of the typical Thanksgiving budget...
INSKEEP: Gobble.
HORSLEY: ...Although...
INSKEEP: He's here all week, ladies and gentlemen - Scott Horsley. Oh, no. Please proceed. Go on. Go on. Please.
HORSLEY: Economist Michael Swanson at Wells Fargo says, you know, grocery stores may eat some of that wholesale increase as long as shoppers splurge on the rest of the meal.
MICHAEL SWANSON: It'll be interesting to see what the retailers do. There might be some promotional activity around that to try to get you in the store to buy the rest of the expensive basket.
HORSLEY: One reason for those high turkey prices, of course, is the avian flu that whipped through poultry stocks this year. But Swanson says energy costs, labor shortages and adverse weather have also raised the price on some other Thanksgiving staples like cranberries and potatoes.
SWANSON: The prices that potato processers were paying for potatoes on the spot market was three times higher than they typically pay.
HORSLEY: That's because of hot, dry weather in the Pacific Northwest, where a lot of potatoes are grown. Now, sweet potatoes, on the other hand, are mostly grown in the Southeast, especially in North Carolina. And they're a relative bargain this year. I saw a big pile of sweet potatoes on sale at my local supermarket this past weekend.
INSKEEP: Good to get that shopping update. Are people going to eat differently this Thanksgiving because of prices?
HORSLEY: We might see some substitutions. Some folks might decide this is the year to try the store-brand stuffing mix instead of the national brand. But Swanson thinks most people are not going to scrimp that much on the big Thanksgiving meal. Maybe they'll cut corners elsewhere. And we're seeing something similar in travel. Airfares dipped a little bit between September and October, but the price of plane tickets is still up almost 43% from a year ago.
INSKEEP: Wow.
HORSLEY: Nevertheless, Hayley Berg, who's with the travel app Hopper, says people are still flying.
HAYLEY BERG: For many families, they may not have been able to travel home or to see family for the holidays in two or three years. Keep in mind that in November and December of last year, we had the delta and omicron waves of COVID, which caused mass cancellations and many travelers to change their plans at the last minute.
HORSLEY: One piece of good news for travelers - rental car prices are down a little bit this year compared to last fall, when rental car companies were still struggling to rebuild their fleets.
INSKEEP: You're just reminding me - I traveled home to Indiana not long ago and had trouble even finding a rental car. Clearly, people are still traveling despite the prices, which makes me wonder what happens when the bill comes due.
HORSLEY: Yeah, some people are digging into their savings to cover expenses. Others are relying on credit cards. Credit card balances jumped about 13% in July, August and September. And keep in mind, interest rates on those credit cards have been climbing in lockstep with the Federal Reserve's rate hikes as the central bank tries to tamp down demand and bring inflation under control. Ted Rossman, who's at Bankrate, says the average interest rate on credit cards is now a record high, topping 19%.
TEDD ROSSMAN: I think there's going to be a lot of post-holiday debt, hangovers, a lot of sticker shock in January, unfortunately.
HORSLEY: So far, though, defaults and delinquencies are still low by historical standards.
INSKEEP: NPR's Scott Horsley, always a pleasure hearing from you. Thank you so much.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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