There is no better indication of inflation than shopping at the grocery store. Items that were only $4 a year ago now have a price tag of $5.50, if not more. Although a $1.50 increase doesn’t seem much, it represents in this example an approximate 27 per cent increase. If you multiply that by 100 items, it adds up.

Years ago, when I use to do many financial presentations, I used to joke how groceries seem to be increasing 3 per cent per year, and how I wished my salary would increase at the same level. The attendees would always laugh – most of us in the room could relate, and most never really gave it a second thought afterwards.

Fast forward to 2024, and the vast majority of the population are starting to feel the purchasing power of their income being affected.

Errol Schweizer, in a Forbes article in February this year, suggests grocery prices in the US are 30 per cent higher than they were four years ago; although initially the impact could be linked to supply chain issues driven by Covid-19, Schweizer writes that grocery store prices have not normalised and have remained high in an effort to increase profit margins.

When you consider a 30 per cent increase in America, I can’t even imagine what the figure would be for our island, given that we must import the vast majority of our goods.

Another way to understand and gauge the overall consumer inflation is by using the light-hearted index developed in 1986 by The Economist: The Big Mac Index.

The Big Mac Index is a theory of purchasing-power parity (PPP). The theory explains that in every country where a Big Mac is sold at McDonald’s, the Big Mac itself remains the same.

The price of the Big Mac should reflect the local price of ingredients, wages and other expenses. Therefore, even though the Big Mac burger is the same in every country, its price differs, which reflects PPP (Ravikumar and Smaldone, 2024).

When PPP begins to change, these changes can frequently be attributed to a variety of factors; perhaps there is a staffing shortage driving up wages, or maybe there is a drought impacting the cost of ingredients.

These are inflationary pressures, and are likely to impact the price you pay for the item. Although the Big Mac Index is a fairly light-hearted concept, it does provide some insight into the topic of inflation and exchange rates, and how that impacts a consumer’s purchasing power.

Now let’s apply this back to the supermarket pinch. We know there are staffing shortages in certain sectors. You can see this on the job boards and in the newspapers.

Grocery stores are trying to hire; therefore, the employer will need to increase wages to hire new talent but increase wages to retain their existing talent. We all know the cost of shipping items to the island has increased; in addition, the wholesale markets which supply the supermarkets have also increased their prices. Consequently, these increases are eventually passed on to the consumer in Bermuda.

Therefore, the following question must be asked: how can you do your shopping and get everything you need in the grocery store in a high inflationary environment?

One answer is to write a grocery list and stick to it. Reduce the treats or snacks, and focus on purchasing items that are on special or else choose lesser-known brands, which can be less expensive.

Purchasing local produce from farms can also be a good choice. Products that are fresh will last longer and have the added benefit that you are supporting local producers.

There are even more creative ways; these may require you to have a green thumb and start to grow herbs or vegetables, or else hone your skills in the kitchen so during your meal preparation you can stretch items and ingredients further than one or two meals.

Alternatively, you can focus on portion sizes so you do don’t overload your plate and throw food away.

The sad fact is that we don’t have a lot of flexibility when inflation impacts the cost of our grocery items. The contents of a supermarket are the necessities to life: they provide us with our food, our paper products, and our cleaning supplies.

The only cuts that can be made on a grocery list are non-essential items, which are typically the first to go when you are trying to stick to a grocery budget. However, these non-essential cuts will only take you so far when inflation is being felt.

Another approach to consider when dealing with higher prices in the supermarket is to work out what day of the week is best to shop for a discount day, or whether it makes sense to simply pick up what you need daily instead of doing a weekly or biweekly shop.

Yet another tactic for tackling price increases – and one which is the more boring approach – is to reduce your eating out or takeout.

Restaurants are feeling the pinch as much as we are, but they also have overheads that are also pinching their bottom line. I’m not suggesting stopping eating out or getting takeout all together, but reducing the number of times per month you do so will give some breathing room for you to spend a little more at the grocery store to get the items you need.

Inflation is being felt island-wide, and although there is no right or wrong way to combat it, being a little more mindful in the way we spend our money will certainly help navigate us through these difficult times.

References

Ravikum, B. & Smaldone, A. (2024): How the Big Mac Index Relates to Overall Consumer Inflation. Available from: https://www.stlouisfed.org/on-the-economy/2024/apr/how-big-mac-index-relates-overall-consumer-inflation [Accessed 8 July 2024].

Schweizer, E. (February 7, 2024) Why Your Groceries Are Still So Expensive. Forbes. Available from: https://www.forbes.com/sites/errolschweizer/2024/02/07/why-your-groceries-are-still-so-expensive/ [Accessed 8 July 2024].

• Carla Seely has 24 years of experience in the financial services, wealth management and insurance industries. Over the course of her career, she has obtained several investment licenses through the Canadian Securities Institute. She holds ACSI certification through the Chartered Institute for Securities and Investments, UK; QAFP through FP Canada; and AINS through The Institutes. She also has a master’s in business and management