Economic Tidbits

Grocery Sticker Shock

Inflation in food prices continues to outpace the overall inflation rate, prolonging the sticker shock experienced by grocery shoppers. The U.S. Bureau of Labor Statistics reported last week the Consumer Price Index (CPI) in January was 6.4 percent year-over-year, the smallest increase since October 2021 and the seventh consecutive monthly decline (Figure 3). Core CPI, excluding food and energy, was 5.6 percent, the lowest since November 2021. Inflation in prices for fuel oil, gas utilities, electricity, and food continues to run hotter than the overall CPI. Fuel oil prices over the past 12 months rose 28 percent; electricity,12 percent; gas utilities, 27 percent, and the overall food index rose 10.1 percent. Food-at-home was up 11.3 percent while food away-from-home was up 8.2 percent. Used cars and trucks was the only category experiencing price declines, off nearly 12 percent.

Figure 3. U.S. Overall and Core Consumer Price Index

Source: Charlie Bilello, This Week in Charts, Feb. 20, 2023

Food price inflation has varied across categories. Cereals and bakery products were up 16 percent over the past 12 months; dairy and related products, 14 percent; fruits and vegetables, 7.2 percent; and meat, poultry, fish, and eggs, 8.1 percent. Even though meat and poultry as a category was higher, beef and veal prices declined by -1.2 percent. Bacon prices, too, are softer this year compared to last, off 4.0 percent. Increases in price of chicken, 10.5 percent, and eggs, 70 percent, pushed the entire meat and poultry category higher.

The inflation seen in food prices during the past two years is atypical. Compared to the 2002-2021 average rate, 3.5 percent, inflation was higher in 2021 and 2022 for nearly all food categories. The two exceptions were dairy products and fruits and vegetables where price increases in 2021 were less than the historical average. The largest price increases over the past 2 years were seen for eggs, fats and oils, and poultry. Overall, the index for food-at-home increased 11.4 percent last year, the largest increase since 1974.

Figure 4. Inflation in Food Prices

Source: USDA, Economic Research Service using U.S. Bureau of Labor Statistics Consumer Price Index Data

The USDA Economic Research Service forecasts food-at-home prices will increase 8.6 percent in 2023, slower than 2022 but still above the historical average. Consumers are adjusting their food purchases in response to higher prices yet spending for food overall remains resilient. While consumers will experience somewhat less sticker shock this year, it will be next year before it’s truly noticeable.

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