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Economy in Brief

U.S. Food Price Inflation Runs Hot
by Tom Moeller  August 27, 2014

Following a muted performance during all of last year, the cost of food is again leading consumer prices higher. During the last twelve months, the consumer price index for food has risen 2.6%, well ahead of nonfood price inflation of 1.9%. This 12-month price increase is the strongest since June of 2012, and it promises to go higher. Growth in food prices since the beginning of this year has been 3.8% (AR).

Strength in food prices this year extends to several categories, notably meats followed by egg prices. The 9.3% y/y gain in meat prices includes a 14.4% (AR) increase since the beginning of the year. Egg prices have risen a similar 9.2% y/y but the 16.8% annualized rise since December is one the largest gain for any major food group. Fish & seafood prices aren't far behind, rising 6.8% y/y and at the same rate since the beginning of the year. Poultry prices have been relatively tame. The 2.7% y/y increase is down from the 4.7% rise last year, and steady at a 2.4% rate since year-end.

In the shortening & spreads category, butter prices jumped 16.5% y/y and at a 28.5% rate this year. Consumers have been able to shift, however, to margarine where prices have risen 1.6% y/y and at a 2.6% rate this year. Also firm have been dairy & related product prices which have risen 4.3% y/y and at a 5.4% rate this year.

Fruit & vegetable prices also have shown strength posting a 2.0% y/y increase, but the rate of gain has heated up to 5.7% since year-end. Within the group, however, there has been real divergence as fruit prices are up 5.7% y/y and at 12.0% rate this year. In contrast, vegetable prices fell 0.5% y/y but rebounded at a modest 1.9% rate so far this year.

Cereal & bakery product price increases have limited grocery bills. Prices here rose 0.3% during the last year and at a 0.8% rate so far this year. Cereal prices barely changed since 2012 and bakery product prices rose 0.4% y/y, up at a 0.7% rate this year. Beverage prices also have limited food price gains as they have been roughly unchanged during the last eighteen months.

Eating out has seen price gains similar to at home increases. Prices have risen at a 2.4% rate during the last year and at a 2.7% rate recently. Full service meal prices have risen 2.6% y/y but at work and school they've risen 1.3% y/y.

The CPI data can be found in Haver's USECON database.

Consumer Price Index (%) July Y/Y 2013 2012 2011
All Items less Food 1.9 1.5 2.0 3.0
  Total Food 2.6 1.4 2.6 3.7
    Food at Home 2.7 0.9 2.5 4.8
      Cereals & Bakery Products 0.3 1.0 2.8 3.9
      Meats 9.3 1.2 3.4 8.8
      Poultry 2.7 4.7 5.5 2.9
      Fish & Seafood 6.8 2.5 2.4 7.1
      Eggs 9.2 3.3 3.1 9.3
      Dairy & Related Products 4.3 0.1 2.1 6.8
      Fruits & Vegetables 2.0 2.5 -0.7 4.1
      Nonalcoholic Beverages -0.1 -1.0 1.1 3.2
      Other Food At Home 0.7 0.0 3.8 3.3
         Butter 16.5 1.2 -7.0 15.5
    Food Away From Home  2.4 2.1 2.8 2.3
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