Food price inflation came down again in September but remained a double-edged sword, as the Consumer Price Index (CPI) has flattened for groceries and stayed stubbornly high for restaurants.
September’s CPI for All Urban Consumers rose 3.7% (unadjusted) year over year, the same level as in August, the U.S. Bureau of Labor Statistics (BLS) reported Thursday. That ended two months of yearly increases in inflation after 12 months of annual declines in the CPI, according to BLS data.
For the rest of the 12-month period, the CPI gained 3.2% year over year for July, 3% for June, 4% for May, 4.9% for April, 5% for March, 6% for February, 6.4% for January and, in 2022, was up 6.5% for December, 7.1% for November, 7.7% for October and 8.2% for September.
Month to month, the September CPI edged up 0.4% (seasonally adjusted), compared with 0.6% in August uptick of 0.2% in both July and June. Monthly growth in the CPI has held below 1% since the summer of 2022, with sequential results this year coming in at 0.1% in May, 0.4% in April, 0.1% in March, 0.4% in February, 0.5% in January and, last year, at 0.1% in December, 0.2% in November, 0.5% in October and 0.4% in September.
“The index for shelter was the largest contributor to the monthly all-items increase, accounting for over half of the increase,” BLS stated. “An increase in the gasoline index was also a major contributor to the all-items monthly rise.”
Excluding food and energy, the September CPI climbed 4.1% from a year ago and 0.3% month over month, about the same as growth of 4.3% year over year and 0.3% month to month in August, BLS reported.
“The Fed will likely be dissatisfied with these data, and we continue to expect interest rates to rise an additional 25 basis points at either the November or December FOMC meeting. Thereafter, we expect the Fed to keep rates steady until mid-2024, whereupon monetary loosening will be appropriate due to an improved inflationary environment and weaker economic activity,” Erik Lundh, principal economist at business think tank The Conference Board, commented Thursday in a brief on the September CPI data.
“However, the recent flare up in energy prices seen in the August and September CPI data run the risk of complicating things,” he explained. “Persistent pressure on the energy side could bleed into other parts of the economy and trigger additional rate increases from the Fed. The outbreak of war in the Middle East elevates this risk significantly and should be watched very closely.”
Grocery inflation nears plateau
In grocery, price inflation stayed well below its prior-year level. The food-at-home index was up 2.4% annually in September, down from 3% in August. That extended steady declines thus far in 2023 from 3.6% in July, 4.7% in June, 5.8% in May, 7.1% in April, 8.4% in March, 10.2% in February and 11.3% in January. Further, those decreases continued a slide from 13.5% in August 2022, including a 13% reading in September 2022.
On a monthly basis, food-at-home inflation inched up 0.1% in September, down from upticks of 0.2% in August and 0.3% in July. Those increases followed a flat reading for June, a 0.1% rise in May and decreases of 0.2% in April and 0.3% in March—the latter representing the first decreases since September 2020, according to BLS.
Monthly growth in the food-at-home CPI has stayed below 1% since a 0.8% rise in August 2022. The 2023 calendar year began with gains of 0.4% in January and 0.3% in February.
Of the six major grocery store food group indices for food-at-home, one decreased and two were flat on a monthly basis (adjusted). Cereals and bakery products saw a 0.4% decline, and there was no gain for fruit and vegetables and for nonalcoholic beverages, BLS data showed. Categories experiencing month-to-month gains included meat, poultry, fish and eggs (+0.8); other food-at-home (+0.2%) and dairy and related products (-0.4%).
Annually, five of the six food group indices increased, with cereals and bakery products tallying the largest gain at 4.8% (unadjusted) but dairy and related products decreasing by 0.2%. Upticks in the other indices included other food-at-home (+4.2%), nonalcoholic beverages (+4%), fruit and vegetables (+0.8%) and meat, poultry, fish and eggs (+0.2%).
“The September CPI report demonstrates that food-at-home inflation continues to stabilize and provide shoppers with a more consistent and predictable shopping experience,” Andy Harig, vice president of tax, trade, sustainability and policy development at FMI-The Food Industry Association, said in a statement on Thursday. “The monthly inflation number for food-at-home declined to 0.1% and—particularly heartening—cereals and bakery products dropped for the first time since the summer of 2021. This continued leveling off—and for certain commodities, lower inflation levels—provides reason for consumers to be optimistic.”
Foodservice pricing relaxes yet remains elevated
Overall, the food CPI—including food-at-home and food-away-from-home—grew 3.7% year over year for September, down from a 4.3% gain for August. Those figures continued steady year-over-year declines from upticks of 4.9% in July, 5.7% in June, 6.7% in May, 7.7% in April, 8.5% in March, 9.5% in February and 10.1% in January.
The food index saw a “threepeat” on a sequential basis in September, up 0.2%—the same as in August and July. That followed gains of 0.1% in June and 0.2% in May, flat results in April and March, and increases of 0.4% in February and 0.5% in January, BLA data showed. The food CPI hasn’t reached the 1% growth mark since rising 1.1% in July 2022.
On the foodservice front, inflation has been coming down but has held at high levels versus a year ago. Food-away-from-home was up 0.4% in September, higher than recent increases of 0.3% in August and 0.2% in July. Those numbers compared with upticks of 0.4% in June, 0.5% in May, 0.4% in April and 0.6% for March, February and January. Year over year, pricing for food-away-from-home was up 6%—elevated yet extending a mostly downward trend from 6.5% in August, 7.1% in July, 7.7% in June, 8.3% in May, 8.6% in April, 8.8% in March, 8.4% in February and 8.2% in January.
“There is still work to be done, and the food industry continues to engage to make sure that Americans have the safest, healthiest, and most affordable food supply possible,” FMI’s Harig added. “As inflation eases and the economic landscape continues to evolve, retailers remain committed to using every available tool to help keep food costs low for consumers.”