For the first time in almost two years, Americans are feeling a little bit better about stretching their dollars when they go to the grocery store. That’s because the yearly average inflation rate for food slipped down to 4.9% for the 12 months ending in July, which is the lowest level since September 2021.

Inflation has cooled across the economy from highs not seen in decades as interest rates have been jacked up for more than a year. Greater food production has helped prices come down in some grocery categories as well. The Bureau of Labor Statistics’ July Consumer Price Index (CPI) report highlights that although food prices are still seeing a bit of upward movement, that trend is much slower than what consumers have been dealing with for more than 18 months.

Overall, the food portion of the CPI rose just 0.2% in July. That was up slightly compared to the 0.1% increase that occurred in June. However, the number has been declining overall for almost a year, having been as high as 0.5% as recently as January. Money spent on food away from home has seen the most dramatic change, falling from 0.6% monthly change in January to 0.2% in July.

Among food purchased for use at home, the index that includes meat, fish, poultry, and eggs declined 0.2% over the last year, the second straight month of decline. Dairy products posted the most modest year-over-year increase at 1.3% greater than 12 months ago.

On a monthly basis, dairy products overall showed a reduction for four straight months before posting a 0.5% month-over-month gain in July.

The food buying picture is still complicated as consumers make decisions on what they can afford at the grocery store. Housing remains a top contributor to inflation and hinders Americans’ spending on other categories. However, domestic disappearance of dairy products rose in April, May, and June according to USDA’s Economic Research Service and remains above year-ago levels. There is optimism that overall inflation will continue to moderate moving forward, which will hopefully continue the trend of food becoming more affordable for shoppers as well.

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(c) Hoard's Dairyman Intel 2023
August 17, 2023

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