Dive Brief:
- Even as the overall rate of inflation cooled in July, food-at-home prices increased 1.3%, according to the Bureau of Labor Statistics’ Consumer Price Index. On a yearly basis, food-at-home increased by 13.1% — the largest 12-month increase since the period ending March 1979.
- The six major food categories tracked by BLS all saw increases in July, with nonalcoholic beverages up 2.3% driven in part by a 3.5% increase in coffee prices. Other food at home and cereal and bakery products saw the largest year-over-year increases.
- While food inflation has continued to rise throughout the year, a few factors could help slow the pace of price increases — including dropping energy prices, increasing supplies of key food commodities and ultimately, shifts in demand.
Dive Insight:
Although the inflationary pressures on food prices are not expected to end anytime soon, some of them could ease. After two months of increases, the energy price index fell 4.6% in July, with motor fuel down 7.6%. Some of this could trickle down to food prices, as manufacturers and their suppliers will not have to pay as much to operate machinery and transport goods.
The price index for cereal and bakery products rose 15% year-over-year in July, and was up 1.8% on a monthly basis, against rising prices for ingredients such as wheat, eggs and fats. There is hope that grain prices could ease in the coming months as Ukraine continues to ship grain that had previously been blockaded by Russia. Since August, over 326,000 tons of grain have been shipped from the country, The Economist reported on Monday. However, since the country was reportedly holding 22 million tons of grain, it could take months before enough product reaches world markets to make a dent in price increases.
Then there is the impact of rising food prices on consumer demand. Consumers have already been trading down in categories like meat, where they have shifted to less expensive proteins, according to Spencer Baird of Inmar Intelligence. Meat prices held steady in July, according to CPI figures, with beef and pork continuing to ease on a monthly basis.
“While there was a drop in the meat category, prices in that category are still much higher than July 2021,” Baird said in an emailed statement. “We’ve seen a surge in consumers thinking twice at the meat counter.” Consumers have been moving from beef to less expensive chicken, if not cutting back from meat altogether. That said, poultry prices rose 1.2% for the month of July, and are up more than 16% year over year, according to BLS data.
There are other ways higher food prices have caused a shift in consumer behavior. According to Inmar data, three in 10 shoppers have stopped purchasing specific foods due to inflation, and 20% of those consumers are no longer buying dairy items. Prices for dairy rose 1.7% in July, up 14.9% year-over-year, according to BLS figures. Producers in the category have seen higher costs for animal feed and fuel.
Some food categories have seen price increases ease. Citrus fruit prices dropped 3.2% in July, the latest in a series of declines. Year over year, citrus prices are 11% higher. Earlier this year, orange prices shot up as inclement weather and an outbreak of citrus greening disease impacted crops.
Despite these recent glimmers of hope, Inmar does not believe monthly fluctuations are an indication that the larger trend of rising food prices will significantly improve in the short-term. “Some months it’s gone down and then it’s right back up,” Baird said. “So at this point, we don’t feel a drop in prices in a specific food category is an indication of inflation abating.”
