Last spring, the BBER calculated our own special index to estimate the impacts of inflation locally, called the Cheeseburger Price Index. At the time, we found that the average price of a cheeseburger and French fries locally was nearly $12.00, based on data from six local restaurants. We also found that while the price increase seen locally between 2021 and 2022 had been lower than the national rate of inflation during the same period, the average price of the iconic meal had increased by roughly 24% from 2018 to 2022, significantly higher than the national rate of inflation during the same period (15%).
Given the continued concerns about inflation, we thought it was time to update our Cheeseburger Price Index to see how prices have changed since last spring. We also wanted to compare our measure with some national indices and to evaluate which individual components of the meal were likely to blame for the recent price spike.
Figure 1 below shows the results of the average price increase of this ever-popular meal from 2018-2023.
As shown in the figure, as of February 2023, the average price of a cheeseburger and fries locally had increased to $12.64, an increase of exactly one dollar over the average price seen last spring.
Since the publication of our original article last spring, our team also discovered the Economist’s famous Big Mac Index. The Big Mac Index was invented by the magazine in 1986 and serves to evaluate whether “international currencies are at their ‘correct’ level.” While the Big Mac Index is meant to allow for comparisons between different countries’ currencies, it also allows us to compare how the price of the ubiquitous sandwich has changed over time.
Figure 2 compares the percentage increase in the Cheeseburger Price Index (maroon) with the Consumer Price Index (gold)[1], and the Big Mac Index (gray). All indices are benchmarked on 2018 values.
In 2019, the average Duluth cheeseburger price increased significantly more than either of the national indices. One possible explanation for that increase could be due to the passage of the Earned Sick and Safe Time (ESST) ordinance, which went into effect on January 1, 2020. The ESST ordinance requires that employers of a certain size offer paid time off for its workers. It’s possible that local businesses may have raised prices in 2019, anticipating an increased cost in the price of doing business.
In 2020 and 2021 the three indices followed a gradual upward trend, each growing at an annual rate of about 2%. Then, in the most recent two years, prices increased rapidly. Between 2022 and 2023, for example, the Cheeseburger Price Index increased by 8.7%, the CPI by 5.7%, and the Big Mac Index by 6.3%.
Given the recent price increases, we were curious to see which of the inputs required to produce a cheeseburger and fries might be contributing the most to the overall increase. The year-over-year change for various inputs necessary to produce a cheeseburger and fries are shown in Figure 3, below. According to data from the Consumer Price Index, beef saw the largest average increase (6.4%) annually from 2018 to 2022. Transportation costs followed closely behind, with an average annual growth rate of 6.0%. While the price of beef has increased the most, the price of cheese has seen the smallest average year-over-year change of the components listed in the figure (3.5%). Wages for non-supervisory production workers have also seen smaller year-over-year increases, at 4.6% annually.
In summary, since 2018, Duluth residents have experienced higher inflation than the rest of the U.S. as measured by the price of the popular menu item. During that time, the U.S. CPI has increased by 20%, whereas Duluth cheeseburger and fries’ prices have increased by nearly 30%. The price of a Big Mac, on the other hand, has increased only 16.3%. Nationwide increases in the price of beef and the cost of transportation appear to be the factors contributing the most to the price increase. The reason for the faster pace of inflation in Duluth (as compared to the CPI and the Big Mac Index) is unknown, but one possible explanation could be the introduction of the Earned Sick and Safe Time ordinance, introduced citywide in January 2020.
At the time of publishing, the latest numbers for the CPI showed a 6.5% increase compared with the previous year. While still well above the Fed’s target rate of 2%, the level has decreased in recent months. Let’s hope that trend continues, as Duluthians are starving for a break in inflation.
[1] The CPI, calculated monthly by the Bureau of Labor Statistics, is the most widely used measure of the average change over time in prices paid by consumers. The BLS calculates the CPI by gathering household goods and services, determine a weighted average that includes food, clothing, housing, and other household spending.