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 3.0 to 4.0 percent, as lower commodity and energy costs combine with weaker domestic and global economies to pull inflation down from 2008 levels. If commodity food and energy costs remain below 2008 levels, pressure on retail food prices will subside, and this could result in low-to-moderate food price inflation in 2009.

Food-at-home prices are forecast to increase 2.5 to 3.5 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 egg prices (up 14 percent), 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

May 2009 Prices

The CPI for all food declined a fourth consecutive month for the first time since 1958, as food prices decreased 0.2 percent from April to May 2009 but are still up 2.7 percent from the May 2008 level. The food-at-home index decreased 0.3 percent in May 2009 but is still 1.5 percent above last May, while the food-away-from-home index increased 0.1 percent and is now 4.2 percent above last May. The all-items CPI increased 0.3 percent in May but is 1.3 percent below the May 2008 level, mostly due to the large decline in energy prices during the fourth quarter of 2008. With energy prices beginning to rise over the past few months, overall consumer inflation should soon return to positive annual levels, and the recent deflationary period should end.

Beef prices decreased 0.5 percent in May—the sixth price decrease in the past 7 months—but beef prices are still 1.6 percent above last May. Pork prices were up 0.8 percent in May, the second price increase in the past 5 months, and are now 1.1 percent above last May’s level. Poultry prices decreased 0.8 percent in May and are up 3.1 percent from last year at this time. As substantially lower feed and energy costs are incorporated into meat production costs, retail meat price inflation has begun to moderate over the past few months. However, the recent resurgence in feed and energy commodity costs, along with weakened demand due to the global recession, leaves meat and poultry producers in a difficult situation regarding prices for the near future.

Egg prices dropped 10.4 percent in May and are now 17.8 percent below the May 2008 level. With producer prices for eggs up sharply last month, though, the downward trend in retail egg prices may reverse itself or begin to moderate over the next few months.

Dairy prices were down 0.5 percent in May and are 5.6 percent below the May 2008 level. Within the dairy category, prices changed as follows in May: milk prices decreased 0.8 percent (the eighth price decline in the past 9 months) and are 13.6 percent below last May’s prices; cheese prices were down 1.3 percent and are 3.8 percent above last May’s level; ice cream and related product prices increased 0.5 percent and are 34.4 percent above last May; and butter prices increased a mostly seasonal 3.8 percent this month but are still 8.8 percent below last May.

Fresh fruit prices increased a completely seasonal 1.6 percent in May, due to an increase in citrus and other fruit prices. The fresh fruit index is now down 7.2 percent overall from last year at this time, with apple prices down 12.7 percent, banana prices down 1.1 percent, citrus fruit prices down 7.2 percent, and other fresh fruit prices down 7.1 percent. The fresh vegetable index decreased a mostly seasonal 2.6 percent in May due to monthly declines in lettuce and tomato prices. Since last year at this time, fresh vegetable prices are down 0.7 percent, with lettuce prices up 4.7 percent, potato prices up 9.2 percent, tomato prices down 7.1 percent, and other fresh vegetable prices down 2.9 percent.

Cereals and bakery product prices were unchanged from April to May 2009. Surging wheat prices caused cereal and bakery product prices to increase sharply in 2008, but with current wheat commodity prices down over 35 percent from a May 2008 high, retail cereal and bakery product price inflation has begun to moderate in 2009. Nonetheless, cereal and bakery product prices are up 3.5 percent from last year at this time, with rice prices up 13.6 percent and bread prices up only 0.5 percent over the past year. Sugar and sweets prices were down 0.5 percent in May but are still 6.1 percent above last May. Within the nonalcoholic beverages category, prices changed as follows in May: carbonated drink prices were up 0.3 percent and are up 7.7 percent from May 2008; coffee prices were down 0.1 percent and are 3.1 percent below last May; and nonfrozen noncarbonated juices and drinks prices were down 0.2 percent in May but are 1.1 percent above the May 2008 level.