Inflation Remains Stubbornly Elevated

For the first time in several months, food-at-home inflation was outpaced by overall inflation in January. According to new data released by the U.S. Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) rose 0.5% in January on a seasonally adjusted basis, while the CPI for food at home edged up 0.4%. The last time the general index surpassed the CPI for food at home was in June 2022.

As 2023 opened, the price of shelter led the general inflation hike. The food-at-home index was a scant 0.1% lower than December 2022, 0.2% lower than November and the same rate as October.

Within the food-at-home sector that reflects grocery pricing trends, four of the six major indexes went up in January. The much-buzzed-about price of eggs remained elevated, with BLS data showing that the index for eggs climbed 8.5% in that month alone. The broader CPI for proteins including meat, poultry, fish and eggs was likewise stubbornly on the move, rising 0.7% during the same time frame.

The index for cereals and bakery products ticked up a full percentage point, while the CPI for nonalcoholic beverages increased 0.4% in a month highly publicized and promoted as “Dry January.”

Shoppers had a little less sticker shock in the produce aisle, where the index for fruits and vegetables dipped 0.5% in January, with vegetables dropping 2.3% during a peak winter month.

On a year-over-year basis, food inflation has spiked 11.3% compared to January 2022 and is up nearly 20% versus January 2021. The overall CPI is 6.4% higher than last January.

While inflation has yet to break in the food retail market, it’s also still going up in the food-away-from-home segment. Last month, the CPI for food away from home increased 0.6%, up from 0.4% in December.

In addition to the much-anticipated inflation news from the U.S. government, other data indicates a market that’s still shaped by higher prices. Mobile advertising platform AdAdapted, for example, released data showing that consumers’ intent to buy meat, poultry, fish and eggs dropped 7.6% during the same time frame, while their plans to buy nonalcoholic beverages slid 8.6%.

The latest CPI data from BLS fell short of analysts' hopes, as inflation was expected to cool more than it actually did in January. John Leer, a chief economist at Morning Consult, told USA Today that the Fed will likely weigh the fresh CPI figure as it makes its next move on interest rates. "Inflation may have peaked, but it’s not showing signs of rapidly returning" to the Fed's 2% inflation goal, Leer pointed out.  

For its part, FMI - The Food Industry Association, released a statement noting that the latest data exemplifies the lingering volatility in the overall industry. “The January CPI illustrates that inflationary price increases are not resetting as quickly, or as uniformly, as consumers would like. Unfortunately, it is likely that food prices will remain elevated in the short term, and we anticipate that there could be further volatility in terms of inflation rising and falling in the coming months,” remarked Andy Harig, FMI’s VP, tax, trade, sustainability and policy development, adding, “Yet we continue to remain cautiously optimistic that the worst of food price inflation is behind us.”