Has the US Really Stopped Making Pennies After 230 Years?

The US is set to strike its final penny as the Philadelphia Mint prepares to produce its last batch of one-cent coins on Thursday, marking the end of over 230 years of penny production. While pennies will remain in circulation, businesses are already beginning to adjust prices due to their dwindling availability, as the costs of producing pennies have risen significantly, costing nearly four cents each to make. This change is expected to save the US government approximately $56 million annually.

Last updated: 04 October 2023 (BST)

What’s happening now

The final production of the penny will occur at the Philadelphia Mint, which has been striking coins since its inception. This decision reflects a broader trend in the US towards electronic transactions and a decrease in the practical use of low-denomination coins. The move aims to reduce government spending and streamline currency production, with officials stating that the current volume of pennies in circulation far exceeds what is necessary for day-to-day transactions.

Key takeaways

The US will stop producing pennies, with the last batch struck on Thursday.
It costs nearly four cents to produce one penny, leading to significant annual losses.
Businesses are expected to adjust their prices, which may lead to increased costs for consumers.

Timeline: how we got here

The production of the penny dates back to 1793. Over the years, various factors have influenced its production:

1793: The first US pennies were minted.
2012: Canada ceased penny production, setting a precedent for other countries.
2023: The US announces the final production of the penny, with the last batch to be struck on 5 October.

What’s new vs what’s known

New today/this week

The announcement of the final penny production has been confirmed, with immediate implications for businesses and consumers regarding price adjustments and the future of low-denomination coins in circulation.

What was already established

It has been widely reported that the cost of producing pennies has exceeded their face value for years, prompting discussions about their relevance in modern commerce.

Impact for the UK

Consumers and households

For UK consumers, the phasing out of low-value coins could mirror similar challenges faced by US shoppers. Prices may round up, leading to higher costs for everyday items.

Businesses and jobs

Businesses in the UK that rely on cash transactions may also need to adapt their pricing strategies, particularly if the UK follows the US in phasing out low-denomination coins.

Policy and regulation

The UK previously considered eliminating 1p coins in 2018, which was later withdrawn. However, they have since halted the production of 1p and 2p coins in 2024, indicating a regulatory shift towards modern payment methods.

Numbers that matter

$56 million: Estimated annual savings for the US government by ending penny production.
60%: Proportion of coins in circulation that are stashed at home in piggy banks, according to a 2022 analysis.
14 cents: Cost to produce a nickel, which is now under scrutiny for potential retirement.

Definitions and jargon buster

Penny: A one-cent coin in the US, currently made of copper-plated zinc.
Mint: A facility where coins are produced, such as the Philadelphia Mint.
Electronic transactions: Payments made through digital means, reducing the reliance on physical cash.

How to think about the next steps

Near term (0–4 weeks)

In the immediate future, consumers may notice price changes as businesses adjust to the reduced availability of pennies. This could lead to rounding up in prices.

Medium term (1–6 months)

As the final penny production takes effect, further discussions around the fate of other low-denomination coins like nickels may arise, potentially affecting consumer pricing patterns.

Signals to watch

Monitor price changes in stores and online retail as businesses adjust their pricing strategies.
Watch for any legislative updates regarding the production of other coins.
Keep an eye on consumer spending patterns as the transition unfolds.

Practical guidance

Do

Stay informed about pricing changes in your local stores.
Consider using digital payment methods to avoid issues with coin shortages.

Don’t

Don’t hoard pennies; they may become increasingly difficult to use in transactions.
Don’t overlook the potential for increased costs as businesses round prices up.

Checklist

Check local pricing for changes in the next few months.
Consider transitioning to cashless payment methods if you haven’t already.
Stay updated on news regarding currency production in the UK and US.

Risks, caveats, and uncertainties

The transition away from pennies may lead to unintended consequences, such as higher prices for consumers. Additionally, the long-term impact on other coins, especially the nickel, remains uncertain. Economic studies suggest that while savings may be realised at the government level, the cost implications for consumers could offset these benefits.

Bottom line

The decision to stop producing pennies is a significant shift for the US, with potential ripple effects for consumers and businesses. As the final production date approaches, awareness of pricing adjustments and the use of low-denomination coins will be crucial for navigating this changing landscape.

FAQs

What will happen to the pennies already in circulation?

Existing pennies will remain in circulation and can still be used for transactions, even after production ceases.

Why is the US government stopping penny production?

The government aims to save money since it costs more to produce a penny than its actual value, alongside a shift towards electronic transactions.

How will this affect prices for consumers?

As businesses adjust their prices due to the penny phase-out, consumers may face increased costs, especially if prices are rounded up.