Trade Group Forecasts Continued Volatility in Food Inflation Despite Recent Improvements
Dive Brief:
- Food inflation has jumped 11.3% during the past year, according to the latest Consumer Price Index from the Bureau of Labor Statistics. In January, grocery prices increased 0.4%. The rise last month was driven by eggs, which rose 8.5%, and cereals and baked goods, which increased 1%.
- Price increases are “not resetting as quickly, or as uniformly, as consumers would like,” and will likely remain “elevated in the short term with continued volatility,” according to an emailed statement from Andy Harig at the Food Industry Association.
- While inflation of food items will continue to be an issue in the short term, there are signs it is slowly decelerating as supply issues correct themselves.
Dive Insight:
While food price increases continued in January, they did show signs of slowing. Overall, prices for food at home rose 0.4% in January from the previous month, down from a 0.5% rise in December, according to the report.
The CPI report said food prices have risen 11.3% from January 2022. The data offered consumers some hope, with the increase the lowest annual rate since last April when food prices jumped 10.8% year-over-year.
As the egg industry continues to grapple with the impacts of bird flu, producers like Cal-Maine are hitting record earnings amid skyrocketing prices for the protein. The price of a dozen grade A eggs rose 13.4% in January to $4.82, according to BLS. In January 2022, by comparison, it cost $1.93.
Supply chain disruptions in other areas have mostly moderated or trended down, but price increases in certain categories such as eggs can crop up and lead to greater overall inflation, according to Kayla Bruun, an economic analyst at Morning Consult.
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“The price fluctuations with groceries have been like Whac-a-Mole, just one thing after another, which speaks to the breadth of the category,” Bruun said.
Bruun said she would be surprised to see another huge jump in grocery prices during the next few months due to the improving state of the supply chain for many food and beverage items. Demand is also softer as prices have increased, she said, and consumer economic conditions improved slightly throughout the month compared to December 2022.
“Our data about grocery purchases has been showing loosening conditions, fewer shortages and easier access to supply,” Bruun said. “Absent some external shock, it would be more likely that we’d see another small increase in prices.”
