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How food inflation travels
28/08/2026
Rising food prices hit emerging-market consumers hard, but shared commodity shocks could have unforeseen implications for inflation around the globe.
Difficult days call for good food, except when nature and geopolitics turn staples into luxuries. Hardly a day goes by without alarming headlines: heat waves threaten harvests, higher energy and fertilizer costs squeeze farmers, and renewed disruptions in the Black Sea hinder grain exports.[1]
Extrapolating from individual events to the prices of particular foods is tricky.[2] This time, we take a different starting point. Our Chart of the Week compares the share of different countries’ consumer-price baskets devoted to food and non-alcoholic beverages consumed at home.
Food and non-alcoholic beverages consumed at home account for just over 8% of the U.S. consumer-price basket, compared with just over 15% in the Eurozone and considerably more in many emerging markets.[3] The figures are not fully comparable because definitions and statistical methods differ. Nevertheless, the broad contrast is instructive and consistent with one of the oldest findings in applied economics, Engel’s law: as households grow richer, food absorbs a smaller share of their budgets.[4] Unfortunately, the law also works in reverse. Where food makes up a large part of the basket, rising prices do more damage to real incomes and headline inflation.
The effects need not stop at national borders. Companies around the world have work done in India. Mexico and Thailand are important links in industrial supply chains, while Turkey supplies Europe with textiles and machinery. If higher food bills push up wages and production costs, the goods and services these countries export could also become more expensive.
Such knock-on effects make a global food-price shock particularly difficult to assess. Harvests can recover, while substitution, local labor-market conditions and government buffers can soften the impact; companies may also absorb some of the higher costs through lower profit margins. “For the U.S. Federal Reserve, the crucial distinction is whether a shock merely squeezes purchasing power or begins to influence wage and price setting more broadly,” argues Christian Scherrmann, Chief U.S. Economist at DWS.
Consumers encounter food prices almost every day. When those prices rise, they can influence inflation expectations even in advanced economies. “Central banks cannot produce better harvests. But they still need to prevent a temporary rise in living costs from becoming embedded in wages and inflation expectations,” points out Ulrike Kastens, Senior Economist Europe at DWS. Higher global food prices would be felt widely. So would their consequences.
Sources: National statistical agencies; Eurostat; U.S. Bureau of Labor Statistics; DWS Investment GmbH as of 8/25/26
* Basket definitions, reference periods and geographical coverage differ between countries.
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