Groundhog Day for Inflation?

Inflation is continuing its stubborn streak. The latest Consumer Price Index (CPI) data from the U.S. Bureau of Labor Statistics revealed yet another bump, with a 0.3% overall uptick in January and a 0.4% gain in food.

The CPI for food at home rose 0.4% last month, following several months of slight increases in the 0.2% range. Four of the six groups within grocery experienced higher inflation in January, including nonalcoholic beverages (+1.2%), fruits and vegetables (+0.4%), dairy and related products (+0.2%) and “other” food at home, such as sugar and sweets, fats and oils (+0.6%).  

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There was some relief in other segments. The CPI for cereals and bakery products fell 0.2% last month while the inflation rate for meats, poultry, fish and eggs remained unchanged, following a spike in egg prices from December to January. Retailers that offer apparel and operate fuel stations also experienced some downward trends, as the CPI for gasoline declined 3.3% and the index for apparel dipped 0.7%. 

On a year-over-year (YoY) basis, grocery inflation is up 1.2% from the first month of 2023. While elevated, that rate is decidedly lower than the 5.1% YoY increase in the foodservice sector. The food-away-from home index is still tracking higher than food at home, with foodservice inflation going up 0.5% in January, driven by higher prices in full-service meals and limited-service meals.

Andy Harig, VP of tax, trade, sustainability and policy development at FMI - The Food Industry Association, put the January results in some perspective. "The first CPI reading of 2024 offers consumers a reason for cautious optimism: The overall inflation rate continues to cool, falling to 3.1%, down from 3.4% in December. The price of food-at-home ticked up slightly in January but stood at 1.2% on an annual basis. It is clear that inflation is headed in the right direction even as some bumps in the road may continue to pop up,” he remarked. 

As for sales in the wake of lingering inflation, the National Retail Federation reported this week that sales at grocery and beverage stores declined 0.2% in January but are up 4.06% from the same period in 2023.