The various holidays celebrated by Americans throughout the year drive a significant portion of consumer spending. Thanksgiving is no exception. Moreover, while most festive occasions include meals or snacks, Thanksgiving is the one celebration dedicated entirely to food. Given that fact, the American Farm Bureau Federation conducts a survey each year to determine the average cost of a traditional Thanksgiving meal.
According to their website, the shopping list for Farm Bureau’s informal survey includes, “turkey, stuffing, sweet potatoes, rolls with butter, peas, cranberries, a veggie tray, pumpkin pie with whipped cream, and coffee and milk, all in quantities sufficient to serve a family of 10 with plenty for leftovers.”
It may come as a surprise, but, after peaking at $50.11 in 2015, the average cost decreased over the next four years by a total of 2.5%. In 2020, the cost dropped further — by a whopping 4.3% to $46.90. However, Americans were only nine months into the COVID-19 pandemic last year when Thanksgiving rolled around, and many remained wary of large gatherings for fear of spreading the virus to loved ones. Turkeys contributed the largest amount to that decrease as grocery stores priced whole turkeys as ‘loss leaders’ to attract shoppers and move more inventory.
But, after a long hiatus, inflation is again a genuine concern.
Originally thought to be a transitory side effect of the rapid post-lockdown economic recovery that created a supply and demand imbalance, inflation is now showing no signs of receding in the near-term. In October, the Consumer Price Index surged 6.2% on a year-over-year basis after three consecutive months of annual gains in excess of 5%. This is the largest increase since December 1990.
According to the U.S. Labor Department, the food price component of the Consumer Price Index, which is relevant to Thanksgiving, increased 0.9% during October and is up 5.4% for the year. Within the food component, meat, poultry, fish and eggs collectively rose 1.7% for the month and 11.9% over the past 12 months!
Even with October’s historic level of increase, consumers are showing no signs of slowing down. Retail sales jumped by 1.7% during the month of October, the third straight month of gains, bringing the annual increase to 16.3%. Analysts believe some of the recent increase is due to consumers getting an early start on holiday shopping. However, the escalating levels of demand will only place more stress on struggling supply chains, likely leading to further price increases.
The tight labor market, along with a continuing record number of job openings, has resulted in higher hourly earnings, but wage gains are not keeping pace with inflation, meaning workers are falling behind. The question is when will this negative real wage growth after inflation impact overall retail sales? And how does this recent bout of inflation impact the cost of Thanksgiving this year?
The recently released survey from the America Farm Bureau Federation gauges the average cost of this year’s traditional Thanksgiving dinner at $53.31. This is a massive increase of nearly 14% from last year. One should consider the fact that a portion of this increase is due to the so-called “base effect,” and this year’s annual comparison has been based on a period of time when — due to the pandemic’s effects — last year’s average cost was abnormally low, distorting the comparison to today’s number.
Even so, this year’s cost is 9% above the pre-pandemic 2019 Thanksgiving, reversing the historical trend of falling prices for the ingredients that comprise the annual celebratory meal. Contributing the most to this year’s increase are turkeys, up 24%; pie crusts, up 20%; dinner rolls, up 15%; and cranberries, up 11%. Consumers get some relief as the price of stuffing fell 19%. The entire list of the ingredients’ costs and comparison to last year can be viewed here.
Even in the face of rising prices, Americans will gather this year with much that is worthy of our gratitude. Effective vaccines and other medical breakthroughs have reduced the devastating impact of COVID-19, and life is slowly returning to normal. Time spent with family and friends, some of whom we have not personally greeted in 20 months, will add to the significance of this year’s day of thanks. As we celebrate, take a moment to reflect on our blessings and those things that matter the most to each of us. Happy Thanksgiving!