Hi, I’m Carl Tannenbaum, Chief Economist for Northern Trust.

As a traditional symbol of rebirth, eggs are a must on Easter.  Children color them and hunt for them, and they feature in a range of holiday dishes.

Unfortunately, the price of eggs has been elevated, making this holiday season more costly. Eggs have contributed importantly to public anxiety over inflation and made life difficult for those tasked with controlling it.  The folks at the Federal Reserve must feel as if they are walking on eggshells at the moment.

The price of eggs has a weight of less than 0.2% in the consumer price index.  Nonetheless, it is among the first items that comes up in conversations about how expensive things have become.  The average retail cost of a dozen eggs has reached a series of all-time highs this year.  The breakfast chain Waffle House has implemented a fifty cent surcharge on each egg served, and thieves recently stole 100,000 eggs from a delivery van in Pennsylvania. Mania and hoarding surrounding eggs has risen in tandem with prices.

The blame lies with a pandemic: not COVID-19, but an avian flu epidemic that has ravaged the egg-laying population.  More than 120 million birds have been lost since the beginning of 2022; 45 million of those have come in the last several months, representing almost 13% of the total flock.  It will take a while to replenish the ranks…assuming that there are no further waves of disease.

For the Federal Reserve, avian flu is an example of a supply shock which could leave egg on their faces.  The current disruption is much smaller than the fracturing of Asian supply chains in 2020 or any number of oil supply restrictions that have arisen over recent decades. But to the degree that egg prices affect inflation expectations, they can punch above their weight in challenging monetary policy.

Inflation was the number one issue that drove voter behavior in last year’s American election.  Price spikes linger in the consciousness a lot longer than they do in calculations of inflation.  And stress on individual categories can dominate calm across a swath of others when people form their impressions. 

Given the high stakes surrounding next year’s midterm elections, incumbents will want to do whatever they can to get egg prices to turn over easy.  If they fail, the campaign could turn into a real scramble.

And that’s the view from here.