If you haven’t noticed, almost every fast food restaurant has a new “value priced” menu which is significantly lower than previous menus. Quiznos now has the $4 Torpedo sandwich; KFC has a new dollar menu; Popeye’s has a $1.99 special; Subway now has $1 sides with the purchase of a sub; Domino’s now has $5 sandwiches and pizza.

The two items at the grocery store I’ve seen significantly drop in price are breakfast cereal and beef. I now regularly buy breakfast cereal for about $1.20 per box where a couple of years ago, cereal was costing me $4+ for a similar box.

So here’s what my recent purchases of my “basket of goods” shows for April 2009.

Basket of Goods April 2009

Item Sep 07 Apr 08 Jan 09 Apr 09 %Change
1 Dozen Eggs $2.09 $2.39 $2.39 $2.39 0%
1 Gal Org. Milk $5.99 $5.99 $5.99 $5.99 0%
16 / 14.5 oz Box Cereal $2.39 $2.47 $1.98 $1.82 -8.1%
1 Loaf Bread $2.19 $2.48 $2.44 $2.44 0%
12 oz Bacon $2.68 $1.88 $1.49 $1.49 0%
Rib Eye Steak $7.87/lb $8.48/lb $8.49/lb $8.79*/lb 3.5%
2.5 Gal Water $2.69 $2.69 $2.50 $2.69 7.6%
           

It is becoming difficult to compare “apples to apples” because the prices of food are all over the board.  For example, the boneless ribeye steaks are $8.79/lb but the bone-in ribeye is $3.50/lb which is a huge difference.   In this particular instance, I purchased the bone-in ribeye which makes perfect sense.   The grocery store also offers in-house coupons for many items, the Honey Bunches of Oats cereal was priced at $2.32 for 14.5 oz box but came with a $0.50 off coupon meaning the true cost was $1.82.

I did find loaves of bread from as low as $0.88/loaf but I try to keep as consistent as I can with the pricing on the basket of goods so I purchased the same loaf I normally do for $2.44.   Overall, if I practiced “substitution” like the government suggests and purchased the lowest priced items across the board, then I would save that prices have deflated about 20% across the board.

Other items that I don’t track have dropped dramatically in price such as lobster, shrimp, fish, beef (non-ribeye), chicken, and many other staples so there is no question in my mind that we are in a deflationary period, I suspect that by next quarter if things haven’t improved, the prices for the same brand items that I buy will drop.