Across the country, consumer prices for most goods and services are on the rise. According to the Bureau of Labor Statistics Consumer Price Index (CPI) for February, the CPI for all goods and services increased by .01 percent from January to February, and 2.8 percent over 12 months. This steady and consistent increase in the general price level has occurred for the past 18 months and is no real surprise with increased levels of employment and wage growth around the country.
Taking a deeper dive into the data show some interesting dynamics across the alcohol beverage segment. The continued trading up by beer consumers into higher-priced segments since 2008 translates into a consistent increase in the beer CPI relative to wine and spirits. Over the past 12 months, beer prices for at-home consumption have risen about 1.6 percent while wine and spirits are both down, -1.7 percent for wine and -0.8 percent for spirits. However, the one-month data for January to February show the beer category seems to be following the other two alcohol beverage segments and is trending the opposite direction as the general CPI. The beer CPI is falling -0.2 percent while CPI increased +0.1 percent. Is this a new trend for 2017? We will have to wait and see.
Taking a step further, there are a host of other goods and services that people purchase every day with constantly changing prices. Consider, if all prices for all goods and services increased by 2 percent, then there would be no relative change in how much people must pay for everything they buy. However, this is not the case in life. The chart below shows changes in prices for a sample of goods and services ranging from groceries to home energy.
Over the course of 12 months, a lot has changed for American consumers. The relative price people pay for groceries, wine, spirits and clothes are now significantly lower after one year compared to what they pay for beer, education, rent, medical and energy. Consumer demand for any good or service is relative to what they pay for everything in their “basket of goods.” Beer consumers are no different; the purchase decisions for beer are determined by the interaction of many goods and services, not just one or even a few.