The Consumer Price Index (CPI), collected and published by the U.S. Bureau of Labor Statistics (BLS), measures price levels for a basket of consumer goods and services. The CPI is the most publicized and widely used measure of consumer price inflation in the U.S. economy. The all-items CPI has many components, including food; the CPI for food similarly measures changes in retail prices but for food items only. Thus, the CPI for food at home is the principal indicator of changes in retail food prices and is closely followed by industry analysts, food market participants, and policymakers.
The Producer Price Index (PPI), another BLS index, measures changes in prices at earlier stages of production—prices paid to domestic producers for their output. Data is collected for nearly every industry in the goods-producing sector of the economy, but of particular interest to the food sector are the indexes for farm products and processed foodstuffs and feedstuffs. Changes in PPIs, particularly the stage-of-processing indexes, are often an early indicator of retail food price inflation for related CPIs in the U.S. economy; this makes the PPI a useful tool in forecasting the CPI.
Forecasting changes in the CPI for food has become increasingly important due to the changing structure of food and agricultural economies. These forecasts can help industry analysts project future costs and demand, inform consumers of possible changes to their food expenditures, and provide important signals to policymakers. Forecasting estimates for farm and wholesale groups are also essential, not only to recognize and predict farm and wholesale food prices, but also to understand predicted changes to retail food prices.
At ERS, work on the CPI and PPI for food are published monthly in the Food Price Outlook and consists of:
- Reporting the current index levels for food and for farm level, wholesale level, and stage-of-processing foodstuffs and feedstuffs,
- Examining changes in the CPI for food and in the PPI for farm- and wholesale-level food, and
- Constructing forecasts of the CPI for food and the PPI for farm- and wholesale-level food for the next 12-18 months.