Consumers are paying a high price for groceries due to persistent inflation
Even though inflation has somewhat eased in other parts of the economy, persistent inflationary pressures in the U.S. economy have kept grocery prices high.
Last week, the monthly consumer price index (CPI) report from the Bureau of Labor Statistics for January showed that prices for food at home, which is the category for food purchased at the store to be prepared at home, were up 11.3% from last year. That number is significantly higher than the overall inflation rate, which as of January stood at 6.4% year-over-year, down from a 40-year high of 9.1% in June 2022.
Families with fixed incomes and low incomes are particularly hard hit by the high cost of groceries. Even with the 8.7% cost-of-living adjustment (COLA) that went into effect in January 2023, which is the largest since 1981 and increased the average monthly benefit by about $140, beneficiaries still have less money left over for groceries than they did a year ago.
Despite the Federal Reserve’s interest rate increases, which are intended to gradually bring inflation back to the Fed’s target rate of 2%, inflation may persist in the economy. After a surprising drop of 0.1 percent in December, the CPI read 0.5% higher in January, according to the inflation report from last week.
Andy Harig, VP for Tax, Trade, Sustainability, and Policy Development at FMI – The Food Industry Association, claims that food retailers are attempting to reduce grocery costs.
“The January CPI illustrates that inflationary price increases are not resetting as quickly, or as uniformly, as consumers would like,” Harig wrote in a press release after the latest CPI report. “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. Yet we continue to remain cautiously optimistic that the worst of food price inflation is behind us.”
“To help consumers stretch their food dollar, grocers have dramatically increased investment in their store brand offerings, among other strategies,” according to Harig’s own survey, which found that consumers are spending an average of $151 per week on food, which is lower than the pandemic peak of $161 per week.
The Department of In January, the Economic Research Service (ERS) of the United States Department of Agriculture (USDA) predicted that food prices would rise more slowly in 2023 than in 2022, despite remaining above historical averages. All food prices will rise by 7.1% in 2023, according to the ERS report released last month, with an interval of 4.2% to 10.1%. The ERS predicts that food-at-home prices will increase by 8% in 2023, ranging from 4.5% to 11.7%.