ERS Expects Even Greater Supermarket Food Price Deflation in 2016

Posted on 03/09/2017 10:19 AM

The all-items Consumer Price Index (CPI) dipped 0.2% from October to November to stand 1.7% above year-ago levels, according to USDA's Economic Research Service (ERS). The CPI for all food fell 0.3% in November to stand 0.4% below year-ago. While the food-away-from home (restaurant purchases) CPI was up 0.1% in November and is 2.3% higher than year-ago levels, food at home (grocery) prices dipped 0.5% last month and they are down 2.2% from November 2015 levels.

In 2016, ERS predicts supermarket prices will decline between 1.5% and 0.5%, which is down from its forecast last month for a decline of 0.25% to 1.25% in 2016. This would also be the first time food prices could reflect annual deflation since 1967. ERS explains that the recent fall in beef and veal, poultry and egg prices drew down its forecast.

Going forward, ERS expects supermarket prices to climb between 0.5% and 1.5% in 2017, which would be well below the 20-year historical average for a 2.5% climb. "Despite the expectation for declining prices in 2016, poultry, fish and seafood, and dairy prices are expected to rise in 2017," ERS explains.

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