Egg prices up due to avian flu. Trump tariffs will make things worse
The inflation outlook in the United States has transformed rapidly from one conducive to a continuation of interest rate cuts to the real possibility of surging prices for consumers.
The causes? Mad King Donald, and avian flu.
The most recent inflation report from the US Labor Department last Wednesday showed the CPI rose at an annual rate of 3% last month, up from 2.9% in December, and up sharply from the most recent low of 2.4% last September. Core consumer prices rose 3.3% in January compared with a year ago, up from 3.2% in December — well above the Federal Reserve’s 2% target. The month on month rate jumped 0.5%, the sharpest monthly rise for well over a year.
Elevated prices turned into a major political headache in last year’s election campaign for the Democrats. Donald Trump famously promised to get prices down on “day one”.
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Instead, inflation looks set to worsen — and the Fed won’t be resuming its interest rate cuts any time soon. The culprits were higher prices for petrol, used cars, prescription drugs and groceries, which included another surge in egg prices. US grocery prices climbed 0.5% in January alone, helped by a 15.2% lift in egg prices — the largest monthly rise in nearly a decade. US egg prices have how soared 53% compared with a year ago.
The egg drought is the result of the avian flu epidemic, which has forced egg producers to cull their flocks: last month more than 23 million birds were killed, after 18 million were slaughtered in December. Not helping is that the US poultry industry operates in animal welfare conditions that are tailor-made for spreading epidemics.
Prices shot up by another 10% in the first week of February, according to US Department of Agriculture (USDA) data, while futures prices rose to an all time high of US$7.86 last week, meaning there will be another big boost to inflation for February when that’s reported in a month’s time. The USDA forecast a 20% rise for this year in January, but the continuing surge in prices and the resilience of the avian flu epidemic might mean that is a conservative forecast.
Consumers are paying US$13 a dozen ($20 Australian) in many parts of the US, and the Traders Joe discount grocery chain has imposed a one pack per shopper limit — as have other smaller chains. Waffle House, a leading breakfast/diner group imposed a 50-cents-per-egg surcharge (which effectively doubles the price of the egg). Egg heists are now becoming common.
Avian flu is no more Trump’s fault than it was Biden’s, but American agriculture is already under pressure from Trump’s decisions: cuts to USAID have direct impacts on American farmers (which have suddenly stirred Republicans into claiming there are some parts of the US aid program that are in fact worth saving), and mass deportations particularly affect agriculture and horticulture, which employ a huge number of undocumented workers.
In the event Trump goes ahead and imposes tariffs on Canada, it will also hit potash, a key element in fertiliser, which has got farm state senators alarmed. Trump’s aluminium tariffs will also flow through into higher vehicle and construction prices.
It means the strong possibility of rising inflation as Trump’s tariffs hit employment in key industries and lowers economic growth. In other words, stagflation. Good luck blaming that on Joe Biden.
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