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Comparing Barcelona with the US.

7. Food is insanely cheap, about 2 euros for a dozen eggs vs. $3.50 in the US, 1 euro for three large baguettes, Kentucky bourbon for $7 vs. $30 in the US, $12 for a bottle of Stoly vodka, vs. $25 in the US., etc.

Booze prices, that’s just tax, obviously. But Lord Knows which bourbon is only $7 in Spain. Baguettes – judging from the P experience – well, depends exactly what type. Eggs, those look about right. Even a little expensive in Spain in fact.

But that brings us to something that might have switched. Which is that food in the US has been cheaper than in Europe. So much so that it’s been a stylised fact. It’s been used in some PPP calculations of relative living costs for example. Food is cheaper in the US (Tim Smeeding used it to balance how health care is more expensive for example and he was using Luxembourg Income Study numbers, the gold standard of the field) than in Europe.

Now, if that’s no longer true then that’s a big, big, shift. When and why?

28 thoughts on “Strange”

  1. I didn’t expect that difference, cheers.
    Looking at eggs on the kroger website, the prices are similar to the UK. Give the Uniteds credit though, there seems to be more choice (take that Bernie) and I’m guessing they have to work 30% fewer minutes to afford the produce what with being more productive and keeping more of their own money.

  2. “Now, if that’s no longer true then that’s a big, big, shift. When and why?”

    My guess would be the fact that increasingly the US food market is dominated by large corporate players that control huge swathes of the market. And as such they have considerable ‘pricing power’ aka oligopolies. I would suspect that the price of the raw materials (farm produce at the farm gate) has not gone up that much, but the price of the product on the shelf has gone up considerably more, as every part of the chain above the producer makes sure they protect or even increase their margins. Its noticeable in the UK that whenever wheat prices would move significantly (ie go up 50% say) the price of bread would always shoot up in the shops, despite the amount of wheat in each loaf being just a few pence. And oddly enough when the price of wheat falls again (as it always does) the price of bread takes a lot longer to come back down again, if it ever does.

    So my guess would be that the US food processing and retailing market has become more and more consolidated into fewer and fewer large players, and they are driving the prices up to their own advantage. And this process has not happened to the same extent, if at all in Spain.

  3. The booze is taxes ( local or import/export ), easy.. And drain cleaner has always been cheep..

    Jim has a lot of the reason why food in the US might be more expensive, but there’s another big difference: Europeans in general still cook. And thus there is a Market for fresh produce.
    And a lot of that is grown “locally” ( especially to US notions of “local”..) in greenhouses. Clogland and Spain are huge players in that market..
    In general, compared to the US, quite a lot of food is grown “locally”, in greater variety, and with cultures that actually cook. Small wonder it’s generally cheaper.

    Nowhere near the whole answer.. too many variables. Between differences in conglomerisation, production/distribution, and cooking culture/demands the market in Europe is different, so logically are the prices.

    As for bread and prices.. Hasn’t it always been thus? Everywhere?

  4. My guess is it depends a lot on what you put in your shopping basket.

    Baguettes – wouldn’t they still be regarded as something quite posh by the Yanks, so a premium price over there, while I suspect standard bread would be a lot cheaper.

    Also, possibly just the snippet Tim has quoted, but there are no meat prices there. I’d expect the
    Yanks to be a lot cheaper on that.

  5. Well, 15 years ago you got $2 to the £, now it’s only just over $1. Might that be part of the reason why US food prices no longer look cheap?

    (I used to enjoy my stays there in the 90s – meals out in NYC at Gallaghers, Smith & Wollensky, Keen’s Chop House … sigh)

  6. Our experience is that US food prices now are about the same as France, perhaps higher. Talking about supermarket prices; we use HEB in TX and Carrefour in Normandy. There’s a choice of two rather large HEBs within a couple of miles of the house; there’s essentially one Carrefour available. The HEB’s have vastly greater choice, and (as is not uncommon) their meat is of higher quality (we generally buy their ‘Natural’ meat, guaranteed free of antibiotics, hormones and weirdness).

    Over the past six years, the US prices have risen to match and surpass the French ones. Didn’t do any supermarket shopping in Barcelona; didn’t notice UK prices when visiting last Springtime.

  7. OK, thanks for that. One of those “things everyone in economics knows” which has been overtaken by events.

    Something I’ve been seeing lately, in breakdowns of monthly budgets and incomes. US ians are spending like $1,000 a month on groceries. That would be really weird unless prices have, as you say, really changed.

  8. I used to love HEB but it hadn’t got to the bit of Texas we lived in except for the Central Market sub-brand. Up until we left in 2015 the price of a shop was comparable between TX and UK, depending on the exchange rate. Obviously you need to adapt to local ways. Seppos prefer white eggs, which have a premium over brown speckled. Good bread is hard to find. There’s an exotic food aisle for Heinz beans, bird’s custard and hobnobs.

  9. America is bigger and more spread out than Europe. Might it be rises in fuel costs? It’s not just big chains buying food cheap and selling dear; it has to be delivered to the stores and the stores need to be heated and lighted.

  10. I doubt it is that the food chains are taking too much Jim. The US is the home of Walmart and they’d smash anything with fat profit margins.

  11. When I first went to the US there were two notable food facts. (i) The workingman’s food – franks and burgers – were amazingly cheap. In terms of flavour not a patch on our own pork pies or f’n’c, but wonderfully cheap. (2) A remarkable number of foods had no flavour – not just bread and tatties, but apples, tomatoes, strawberries, cheese, and on and on. Two exceptions: blueberry pie and freshly squeezed OJ were delish. (And another thing: the coffee. Dear God, the awfulness of the coffee – and they had the bloody nerve to criticise ours.)

    I can’t comment on the fish since I never saw any bar a meal at Cape Cod – excellent chowder, then excellent lobster. The only other good meal I had in three months was in a Chinky in SF, where I was the only white face.

  12. I wonder what the economic literature predicts is the effect of food stamps, and what the actual effects are.
    If only we could ask Saint Nicola if she’d like a transfer of a £400mn or so to run the experiment – the current 25+ applicable amount of benefit claims is £77.00 a week, cash. The experiment would mean that Scots on benefits get £50.00 a week cash and £45.00 a week in food stamps, total £95.00, so more benefits, but less of it is fungible. Would the long run price of groceries rise, fall or stay the same?

    Someone must have worked it out for the US.

  13. From memory, was in France and the US in about the mid-nineties. The US lived up to its cheap food reputation, as did France. Early 2000s, didn’t seem as true for the US. French seemed to rise a bit later.

    So, for France – introduction of the Euro, maybe? For the US, dunno, something about wages? Clinton era?

  14. Are we not dealing with irrational expectations that follow no logical rules?

    So why isn’t indexation the best answer, again?

  15. Ah, or maybe the UK got cheaper?

    Best guess – globalisation. Domestic producers shift away from domestic consumers to get a better price, so excess production gets flogged elsewhere, leaving less domestic surplus to keep local prices down.

    Peg it at around 2002 or so?

  16. It’s particularly surprising as Trader Joe’s (with 530 locations) is actually owned by Aldi; in addition to over 2,000 Aldi-branded stores in America. Perhaps American shoppers just aren’t as price-sensitive as Europeans.

  17. Is it not the case that the US government has done a number on energy (and particularly and/or additionally on fertilizer), so that it now approaches European costs? (Ditto for regulatory excess and uncertainty.) Food (and everything else) downstream of similar costs would be expected to have similar prices.

  18. Last visit to HEB – $438. It’s about 2 weeks of food for two of us.

    Vino is bought elsewhere.

    Now, true, this supermarket trip included nearly a kilo of good dead cow – NY strip, nicely marbled, which was $17 a pound. But that still leaves $400….

  19. rhoda

    we’re close to Austin, where (I think) the first Central Market was established.

    For folk who don’t know about this, it appears to have been a stroke of genius by someone in HEB.

    Supermarkets are low-margin, and Walmart is a dangerous competitor. HEB realized they needed to price compete but improve margins. So they opened a store in downtown Austin which specialized in yuppy-lovable stuff, all at high margins (for supermarkets). High quality stuff, too. Lots of good fresh stuff – wider selection than most places. Good imports – want French cheese – there y’go. Etc. So now HEB enjoy reasonable margins overall while still selling at prices comparable to/competitive with Walmart – in their ordinary “HEB” stores. Which also have good stuff, especially good quality fresh stuff.

    We don’t frequent the place – because it’s in Austin, and traffic is abominable, and parking horrific and…

  20. To get a more understandable comparison, how many minutes of median-income work is required to buy a loaf of bread?

  21. dearieme

    yes, the coffee was ***dreadful ***
    now we use HEB whole grain ‘French Roast’ and grind it on demand in the pouffy Australian coffee grinder/machine.. Better than Carte Noir, I can tell you.

    And HEB gots lotsa breads. We alternate between the 7-grain and the multi-grain. both good for Marmite; the multigrain is bigger slices, so better for bacon sarnies. HEB has quite good bacon, too – thick cut. Got to search for the packs which are mostly meat rather than mostly fat, but it works.

  22. To give the first bit of data, in the UK 6 minutes of median-income work buys a loaf of bread. (£1.25/(£25,000/52wks/37.5hrs))*60mins

  23. If you’re paying 3.50 for eggs in the US then you’re buying ‘organic’.

    And 7 buck liquor of any type is going to be rotgut.

  24. In New Zealand there are only two supermarket chains and together with a sales tax on everything ,food is expensive and getting more so. For a country which seems to have more cows than people and so should be awash with milk,locally made cheese is truly awful.Still if the Princess Jacinda gets her way and enacts her fart tax,most farmers will be driven out of business and meat and milk will become the food of the elite.(Never mind what it will do to the export trade.) I do the main food shop and only buy basic necessities having to eke out the pension. I have seen a typical weekly bill go up from just over $100 to almost $180 all in the space of two years.Jacinda has tried to blame covid, but that just does not wash anymore.

  25. @BlokeInTejas
    The only thing I haven’t been able to find in Texas is decent sourdough bread. HEB sourdough isn’t. The best I have been able to find is Kneaders. Still isn’t a patch in the sourdough I was able to get in California.

  26. @2008: “locally made cheese is truly awful”.

    When we lived in Christchurch there was a dairy on the Bank’s Peninsula that produced several styles of cheese. The two we tried were pretty good. Good going given that not long before the locality was sheep country not cow country.

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