Food accounts for less and less of household spending
Dutch Consumers have been confronted by strong price increases in the shops in the last six months. In spite of this, they have been spending less and less of their total budget on food in recent decades.
Inflation and food prices
Strong rise in food prices
Prices of food have risen substantially in the last six months. In the last five months, the increase on a yearly basis was even as high as over 6 percent. This is mainly the result of the situation on the global market, where increased demand has pushed up prices significantly. The last time that prices rose so strongly in the Netherlands was at the beginning of 2002, shortly after the outbreaks of BSE and foot-and-mouth disease. Then it was mainly meat prices that rose so sharply, until the supermarket war ushered in a period of considerable price cuts. All in all, developments in food prices are a lot more erratic than the course of total inflation.
Share of food in total spending
Shrinking share of food
In spite of the recent increases in food prices, because households have been spending relatively less on food, these same prices count for less in the calculation of inflation. The weight of a particular category in the calculation of inflation depends on the how much households spend on this category. In 1969 food accounted for nearly one quarter of inflation. In 2006 this is only a little more than 10 percent. What this in fact means is that consumers are spending relatively less on food than forty years ago.
Spending on food, by category, 2006
Large part of food budget spent on meat
The largest spending category within food is meat: 20 cents of every euro spent on food is spent on meat. Meat therefore weighs heaviest in the calculation of the food share in total inflation. This is no different from forty years ago. Then, too, a lot of money was spent on meat, especially beef. Now consumers are most likely to buy chicken and other meat. Bread, too, accounts for a larger share than in 1969, just as vegetables, potatoes and fruit. For dairy products the opposite is true.