Rise in the price of food. How long yet?

We continue reporting on the evolution of the difference between core CPI and the index for food (beverages not included). In the previous post we confirmed that this difference had been following the long-term (negative) quasi-linear trend since 2001. The main question is when the difference will reach its bottom value and the trend will turn to a positive one. This pivot will manifest the change from increasing to decreasing food price. The importance of this event cannot be underestimated in the current political and economic situation in developing countries, where populations are literally starving.

Previously, we suggested that the remarkable rally in food prices had forced the index for food to grow faster than predicted and the deviation from the trend predicted in 2007 reached ~7 units in 2008 [1]. Originally, the predicted difference (red line in Figure 1) intersected the zero line around 2014.

In January 2009, the trend line was much steeper and crossed the zero line. In March 2011, the (black line) trend crosses the zero line in the end of 2010. Therefore, Figure 1 demonstrates that the difference between the core CPI and the index of food has been slowly approaching to its original trend (red line) since 2009.

Here we suggest that the intercept with the zero line and the pivot to the decreasing food price now seems to start in 2011-2012. The previous negative/positive pivot was at the level of -10, as displayed in Figure 2. If it is the case for the current situation the negative trend will change only in after 2016.

Figure 1. The difference between the core CPI and the price index of food. The pivot point to a positive trend in likely in 2011 or 2012.

Figure 2. The difference between the core CPI and the price index of food between 1960 and 2011.

1. Kitov, I., Kitov, O., (2008). Long-Term Linear Trends In Consumer Price Indices, Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ), pp. 101-112.

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