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Costing out turkey day

It's kind of a fun story: at this time every year, the American Farm Bureau releases a report on how much it costs to put Thanksgiving Dinner on the table. But beyond marveling at how the cost of the relish tray (the relish tray?) has changed over the year, the statistics paint a pretty interesting picture of the consumer sector in the United States.

Here are the summary statistics: as of November 2011, Americans had to spend an average of $49.20 to whip up a Thanksgiving dinner for ten people. That sounds like a pretty reasonable price to me, given that it covers turkey, stuffing, pumpkin pie, green peas, rolls, fresh cranberries and a whole lot more. Thing is, though, it is $5.73 cents more than it was last year (a rise of 13 percent) and that money has to come from somewhere.

Somewhere could be from an employer, of course: generally people try to get enough of a wage hike to cover higher grocery costs. This year, however, average hourly earnings in the U.S. were only up by 2.0 percent as of October, so that's not really how they are going to pay for the feast.

If not from wages, then, there are still a couple of other options. It can come right out of savings - and there is some evidence that is exactly what is happening. The savings rate in the U.S. went from close to 6 percent though most of last year to 3.5 percent as of September, meaning that people are drawing down their wealth to keep spending. That could continue a bit more, of course, but it is generally not a great idea.

Very likely, the cost of Thanksgiving (and we should re-iterate that in the U.S. this ranks as 'non-discretionary' spending, it is the last thing people are going to cut back on) is to at least to some extent going to come from spending less somewhere else. Maybe people do it by cutting back on the morning latte, or by planning more modest holiday parties, or by not sending Christmas cards or by slashing someone they don't like anyway from the present list. However they do it, though, some retailer is going to feel the pinch.

And here's another small point: despite the higher cost this year, the cost of serving up Thanksgiving dinner has actually fallen, in inflation adjusted terms, since 1986. Food prices have dipped over the past couple of decades (partly because of better agricultural technology) but that's a trend that is in reverse. Growing wealth in China and much of Asia means that higher prices are the trend to come.

So think about this: despite a two decade fall in grocery prices, Americans got more indebted than ever and were in a pretty desperate position when the last recession came.

So what exactly does it mean for consumer health when prices for food are actually on the rise?

Happy American Thanksgiving weekend.

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