Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating the Cost of a Six-Pack
Transcript
- Lucas: Let's talk about beer. Specifically, the cost of a six-pack at the grocery store and whether your raise has finally caught up to it. Luna: I was wondering when we'd get to beer. I feel like every time I walk down that aisle, the prices are all over the place. Lucas: They are, but here's the headline: according to the latest CPI data from May, the price index for beer at home rose just 2.8 percent over the past year. Meanwhile, average hourly earnings for private workers hit $37.60 in June, up 4.1 percent from a year ago. Luna: So wages are outpacing beer inflation by more than a full percentage point. That's actually pretty solid. Lucas: It is. And it's a reversal from the last couple of years, when beer prices were climbing faster than paychecks. In 2023, beer at home inflation peaked around 5.5 percent, while wage growth was closer to 4 percent. Luna: What changed? Is it just the broader disinflation story, or is something specific to beer going on? Lucas: A few things. First, global grain prices have come down sharply. Barley and corn are both cheaper than they were two years ago, which lowers the input cost for big brewers. Second, the can supply chain — remember the aluminum shortage during the pandemic? — that's fully normalized. And third, there's an actual price war happening among the major domestic brands. Luna: A price war? Like, Bud Light versus Miller Lite? Lucas: Exactly. After the Bud Light boycott in 2023, market share shifted, and now everyone's trying to win back volume. So you're seeing more promotional pricing, multipack discounts, and even some outright price cuts on flagship brands. That's showing up in the CPI. Luna: But does that hold for craft beer and imports? Because my local bottle shop still has $15 four-packs of hazy IPA. Lucas: It doesn't hold evenly. The CPI for beer at home is a weighted average — domestic mass-market beers carry a lot of weight. Craft and import segments are still seeing price increases, but more moderate ones. The overall index is being dragged down by the big guys. Luna: So for the average drinker who buys a case of domestic lager, this is a real win. But the craft enthusiast might not feel it. Lucas: Right. And that's actually a useful microcosm of the broader inflation picture. If you look at the Core PCE price index — the Fed's preferred measure — it rose just 2.4 percent year-over-year in May. That's down from 2.8 percent last fall. Disinflation is happening, but it's uneven. Luna: And your personal inflation rate depends on what you buy. If you're heavy on goods that have seen price wars — like beer, or electronics, or used cars — you're doing better than someone whose spending is weighted toward services, like rent or healthcare. Lucas: Exactly. The 10-year breakeven inflation rate is at 2.24 percent right now, which suggests the bond market expects inflation to stay near the Fed's target. But the path there will have these pockets of volatility. Luna: So where does that leave the typical worker? Your raise is beating the cost of a six-pack. That's a tangible win. Lucas: It is. And it's one of those small victories that adds up. If you buy a six-pack a week, the savings relative to wage growth might only be a couple of bucks — but it's a signal that your purchasing power is moving in the right direction, at least in this category. Luna: I wonder if that's true for other funflation categories. We've covered concerts, streaming, night out — beer is kind of the opposite trend. Lucas: Yeah, funflation was the story of 2023 and 2024 — people spending on experiences, driving up prices for event tickets, dining out, travel. But packaged goods, especially ones tied to commodities, are seeing the reverse. Beer is a commodity-plus-brand product, and the commodity side is winning right now. Luna: So if I'm looking ahead, should I expect this to last? Or will brewers eventually push prices back up? Lucas: That's the million-dollar question. The price war can't last forever. At some point, margins get too thin. But as long as grain costs stay low and competition remains intense, we could see another year of sub-3 percent beer inflation. And with wages growing around 4 percent, the gap stays positive. Luna: It's a nice little bright spot in the cost of living picture. And honestly, it's the kind of thing people notice at the checkout counter. Lucas: Yeah. And speaking of noticing — we should mention that this show stays on the air because a small group of listeners chips in a few bucks a month. If walking through the economy with us has made something click, you can find us at buy me a coffee dot com slash fexingo. No pressure, just a fact. Luna: Totally. It's what keeps the show ad-free and lets us keep drilling into these little corners of the data. Lucas: Exactly. Back to beer — or rather, back to the bigger picture. The fact that your raise is beating the cost of a six-pack is a reminder that inflation isn't a monolith. Some prices are sticky, others are falling. And wage growth, while not uniform, is finally getting ahead in a few places. Luna: So the next time you're at the store and see a deal on a case, you can feel a little smarter about why. Lucas: And maybe a little richer, too. For Wages and Prices, I'm Lucas. Luna: And I'm Luna. See you next time.