Food CPI and Expenditures: Analysis and Forecasts of the CPI for Food

Overview Background Analysis and Forecasts of the CPI for Food What's Behind the Forecasts? How Changes in Input Costs Affect Food Prices CPI Bias Three Types of Food Expenditures Series Measuring the ERS Food Expenditure Series Recommended Data Recommended Readings Related Links

On the Accuracy of Nielsen Homescan Data

Food Price Outlook, 2009

In 2009, the Consumer Price Index (CPI) for all food is projected to increase 2.5 to 3.5 percent, as lower commodity and energy costs combine with weaker domestic and global economies to pull inflation down from 2008 levels. Pressure on retail food prices has subsided, resulting in low-to-moderate food price inflation in 2009.

Food-at-home prices are forecast to increase 2.0 to 3.0 percent, while food-away-from-home prices are forecast to increase 3.5 to 4.5 percent in 2009. The all-food CPI increased 5.5 percent between 2007 and 2008, the highest annual increase since 1990. Food-at-home prices, led by fats and oil prices (up 13.8 percent) and cereal and bakery product prices (up 10.2 percent), increased 6.4 percent, while food-away-from-home prices rose 4.4 percent in 2008.

See ERS data on CPI for food and CPI forecasts

July 2009 Prices

The CPI for all food decreased 0.2 percent from June to July 2009 (the fifth monthly decline in the past 6 months), and food prices are now 0.9 percent above the July 2008 level. The food-at-home index decreased 0.5 percent in July 2009 and is now 0.9 percent below last July, while the food-away-from-home index increased 0.1 percent and is now 3.2 percent above last July. The all-items CPI decreased 0.2 percent in July and is 2.1 percent below the July 2008 level, mostly due to the large decline in energy prices during the fourth quarter of 2008. As energy prices have started to rise over the past few months, overall consumer inflation should soon return to positive annual levels and put an end to the recent deflationary period.

Beef prices decreased 2.3 percent in July—the eighth price decrease in the past 9 months—and are 3.5 percent below last July. Pork prices were up 0.1 percent in July, the third price increase in the past 7 months, and are now 2.3 percent below last July’s level. Poultry prices decreased 1.8 percent in July but are up 0.7 percent from last year at this time. As substantially lower feed and energy costs were incorporated into meat production costs over the past 6 months, some retail meat prices are now lower than last summer. However, the recent resurgence in feed and energy commodity costs may curtail the current deflationary period.

Egg prices dropped 2.7 percent in July and are now 21.3 percent below the July 2008 level.

Dairy prices were down 0.6 percent in July and are 9.7 percent below the July 2008 level. Within the dairy category, prices changed as follows in July: milk prices decreased 0.4 percent (the tenth price decline in the past 11 months) and are 18.4 percent below last July’s prices; cheese prices were down 0.4 percent and are 9 percent below last July’s level; ice cream and related product prices decreased 0.7 percent but are still 1.8 percent above last July; and butter prices increased 0.9 percent this month but are still 8 percent below last July.

Fresh fruit prices decreased a completely seasonal 0.6 percent in July, due to a decrease in banana and other fresh fruit prices, while apple prices increased 1.4 percent and citrus fruit prices increased 8.8 percent. The fresh fruit index is now down 6.7 percent overall from last year at this time, with apple prices down 18.2 percent, banana prices down 2.0 percent, citrus fruit prices down 4.2 percent, and other fresh fruit prices down 4 percent. The fresh vegetable index decreased 0.8 percent in July, mostly due to decreases in lettuce, tomato, and other fresh vegetable prices. Since last year at this time, fresh vegetable prices are down 6.1 percent, with lettuce prices down 2.5 percent, potato prices down 6 percent, tomato prices down 8.9 percent, and other fresh vegetable prices down 6.1 percent.

Cereals and bakery product prices increased 0.2 percent from June to July 2009 and are up 1.2 percent from last year at this time, with rice prices down 3.8 percent but breakfast cereal prices up 3.5 percent over the past year. Sugar and sweets prices were down 1 percent from June to July 2009 and are 4.3 percent above last July. Within the nonalcoholic beverages category, prices changed as follows in July: carbonated drink prices were down 0.8 percent but are still up 6.1 percent from July 2008; coffee prices were down 0.1 percent and are 2.9 percent below last July; and nonfrozen noncarbonated juices and drinks prices were up 0.2 percent in July and are 0.2 percent above the July 2008 level.