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, 2010

In 2010, the Consumer Price Index (CPI) for all food is projected to increase 2.5 to 3.5 percent, with the same increase of 2.5 to 3.5 percent forecast for both food-at-home (grocery store) and food-away-from-home (restaurant) prices. Recovering global economies will lead to increased commodity and energy costs combined with stronger domestic and global food demand to push inflation up from the low 2009 levels. Retail food price inflation in 2010 (though not projected to be as strong as in 2008) will rebound from the 2009 level toward a moderate level, slightly above the long-term historical average.

The all-food CPI increased 1.8 percent between 2008 and 2009. Food-at-home prices increased by 0.5 percent—the lowest annual increase since 1967—with dairy prices declining 6.4 percent and fresh produce prices dropping 4.6 percent, while food-away-from-home prices rose 3.5 percent in 2009.

See ERS data on CPI for food and CPI forecasts

December 2009 Prices

The CPI for all food increased 0.2 percent from November to December 2009, decreased 0.1 percent from October to November, and is now 0.5 percent below the December 2008 level. For the first time since 1959, the food CPI has been below the previous year's level for four consecutive months (September-December 2009), as declines in meat, dairy, and produce prices have pushed the food CPI to negative levels. The food-at-home CPI increased 0.3 percent in December 2009 but is still 2.4 percent below last December, while the food-away-from-home index increased 0.1 percent and is now 1.9 percent above last December. The all-items CPI decreased 0.2 percent in December but is still 2.7 percent above the December 2008 level. November and December 2009 mark the first time since February 2009 that the annual level of overall inflation is positive, signaling a likely end to recent months of consumer price deflation.

Beef prices decreased 0.5 percent in December—the 11th price decrease in the past 14 months—and are 4.7 percent below last December. Pork prices were down 0.6 percent in December, the ninth price decrease in the past 12 months, and are now 7.8 percent below last December’s level. Poultry prices increased 0.2 percent in December but are down 1.5 percent from last year at this time. As substantially lower feed and energy costs were incorporated into meat production costs over the past 10 months, retail meat prices are now lower than last year. However, the resurgence in feed and energy commodity costs as the overall economy begins to recover from the recession may curtail the current deflationary period.

Egg prices increased 3.8 percent in December but are still 6.6 percent below the December 2008 level.

Dairy prices were up 0.5 percent in December but are 7.6 percent below the December 2008 level. Within the dairy category, prices changed as follows in December: milk prices increased 1.2 percent (only the fifth price increase in the past 16 months) but are 10.6 percent below last December’s prices; cheese prices were up 0.7 percent but are 9.3 percent below last December’s level; ice cream and related product prices decreased 1.7 percent and are 2.1 percent below last December's level; and butter prices increased 4.7 percent this month but are 11.5 percent below last December. Overall, dairy prices were down 6.4 percent in 2009, the largest annual decrease since 1949.

Fresh fruit prices increased 0.2 percent in December, due to increases in apple and banana prices. The fresh fruit index is down 3.7 percent overall from last year at this time, with apple prices down 9.9 percent, banana prices down 8.4 percent, citrus fruit prices up 0.1 percent, and other fresh fruit prices down 1.3 percent. The fresh vegetable index increased a mostly seasonal 2.7 percent in December, due to increases in tomato and lettuce prices. Since last year at this time, fresh vegetable prices are down 4 percent, with potato prices down 16.9 percent, lettuce prices up 9.8 percent, tomato prices up 3.2 percent, and other fresh vegetable prices down 5.5 percent.

Cereals and bakery product prices increased 0.2 percent from November to December 2009 but are down 0.8 percent from last year at this time, with rice prices down 8.8 percent but cookie prices up 4.3 percent over the past year. Sugar and sweets prices were up 0.2 percent from November to December 2009 and are 2.8 percent above last December. Within the nonalcoholic beverages category, prices changed as follows in December: carbonated drink prices were up 0.8 percent and are up 0.5 percent from December 2008; coffee prices were down 1.3 percent and are 2.8 percent below last December; and nonfrozen noncarbonated juices and drinks prices were down 0.6 percent in December and are 3 percent below the December 2008 level.