ERS Lowers Supermarket Price Forecast for 2016

Posted on 03/09/2017 10:20 AM

The Consumer Price Index (CPI), a measure of economy-wide inflation, climbed 0.2 percent between August and September and it now stands 1.5% above year-ago levels, according to USDA's Economic Research Service (ERS). The CPI for all food rose 0.1% from August to September, but it is still down 0.3% from year-ago. While the food-away-from-home (restaurant buys) CPI climbed 0.2% in September and is up 2.4% from year-ago, the food-at-home CPI held steady with the month prior and is down 2.2% from September 2015 levels.

ERS adds that retail food prices have either held steady or declined for seven of the first nine months of 2016. In contrast, restaurant purchases have consistently climbed month-over-month. This is because restaurant prices "primarily comprise labor and rental costs with only a small portion going toward food. For this reason, decreasing farm-level and wholesale food prices have had less of an impact on restaurant menu prices," ERS explains.

The department predicts supermarket prices will change between -0.75% and 0.25% for all of 2016, which would be well behind the historical average of 2.5% growth. The lower forecast is due to recent declines in beef and veal, poultry and egg prices.

In 2017, ERS believes supermarket prices will rise between 1% and 2%, as it expects beef and veal, poultry and dairy prices to climb. It also points out that "a stronger dollar could continue to make the sale of domestic food products overseas more difficult," boosting supplies at home and weighing on prices.

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