Skip to main content

Inflation Stable – But Not for Groceries

Latest Labor Dept. data and independent research show another round of price increases in food at home
Lynn Petrak, Progressive Grocer
BLS data
The inflation-hit eggs sector experienced a slight increase of 0.5% in July. (Source: U.S. Bureau of Labor Statistics)

Despite a dip in fuel costs and an unchanged overall Consumer Price Index (CPI) in July, the U.S. Bureau of Labor Statistics (BLS) reported yet another bump in food prices. The latest hike is an indicator that inflation has yet to peak in the grocery sector.

The gasoline index declined 7.7% in July and the general CPI held steady at 0.0%, but the food index was up 1.1% over June and the food-at-home CPI edged even higher, at 1.3%.

Food-at-home prices have shot up 13.1% since July 2021, the steepest yearly rate since March 1979. That tracks with other data, such as a new report from Numerator showing a 15.4% year-over-year gain in grocery prices and just-released data from IRI revealing a 14.4% year-over-year surge in food-at-home prices.

According to the fresh U.S. government data, food-at-home prices were driven by increases in all six major grocery store indexes. The CPI for nonalcoholic beverages led the way, coming in 2.3% more than in June. Cereals, bakery products and “other” food at home went up 1.8% and the index for dairy and related product rose 1.7% in July. The inflation-hit protein sector, including meats, poultry, fish and eggs, has yet to peak, with a slight increase of 0.5%. Fruits and vegetables climbed 0.5%, too.

In comparison, the CPI for the foodservice industry rose at a slower pace of 0.7% in July on the heels of a 0.9% uptick in June. The food-away-from home index is 7.6% higher than this time last year.

Even as some financial analysts took the overall flat CPI as a signal that inflation may have reached its pinnacle, retail experts noted that the continued escalation in grocery prices will have ripple effects for the rest of the year and likely beyond. “The longer inflation goes on, the more likely it is for consumers to make permanent the behavior changes they’ve adopted during these inflationary times – whether that’s switching to more private-label products or buying a larger share of their essential goods at dollar stores and value-driven grocers,” remarked Matt Pavich, senior director of retail innovation at Revionics, an AI-powered retail price optimization solutions company, adding, “ Despite these major headwinds, retailers never forget the core goal of coming through with reliable products and services for shoppers, including being competitive on price.”

[Read more: "Which Retailer’s Private Label Brands Are Growing Fastest?"]

Krishnakumar (KK) Davey, president of Thought Leadership for CPG and Retail at IRI, said grocers are facing ongoing pressure. “Consumers are responding to rising prices by shopping promotions, prioritizing value options, and trading down to avoid going without,” he said. “We are advising our manufacturer clients to deploy all levers of strategic revenue management, prioritize strong in-market execution, and invest in retailer partnerships to ensure that the right products are available in the right places at the right times. Additionally, retailers must have the tools to quickly adjust to changes in consumer preferences to ensure they are offering the right assortment at price points that appeal to price-sensitive shoppers as well as their most valuable customers.”

According to IRI’s data, consumers are in bargain-hunting mode. Dollar sales and percent of sales volume lift have risen among some of the most-promoted categories in grocery and shoppers are buying more value-oriented items like pasta, rice, frozen potatoes and canned soup. Private label is growing as well, with private label sales up in categories like fresh eggs, sugar, sour cream, frozen meat and bottled water.

That said, shoppers who have grappled with the pandemic, inventory issues and high prices over the past few years are willing to spend on some small luxuries that lift their spirits. For example, IRI’s research shows a trade-up in segments such as premium and super-premium imported beer and premium frozen entrees.

This ad will auto-close in 10 seconds