According to the latest inflation data provided by the US Labor Department’s Bureau of Labor Statistics on March 10, 2022, the average price of food in the United States increased 7.9% in the 12 months ended February, the most since July 1981 and after gaining 7.0 percent earlier (BLS).
The Consumer Price Index includes food inflation as a significant component. It is always covered in the CPI report every month. It includes variations in pricing for “food away from home” and “food at home” for example, in February, the two had year-over-year hikes of 6.8% and 8.6%, respectively.
Consumer Price Index for Food (not seasonally adjusted)
Before seasonal adjustment, the all-items Consumer Price Index (CPI), a measure of overall inflation, climbed by 0.9 percent from January to February 2022, up 7.9 percent from February 2021. From January to February 2022, the CPI for all foods climbed by 1.0 percent, and food costs were 7.9% higher than in February 2021.
Depending on whether the food was purchased for consumption away from home or at home, the level of food price inflation varies:
- The CPI for food purchased outside of the home (restaurant purchases) climbed 0.4 percent in February 2022, and was 6.8% higher than in January 2021; and
- The CPI for food purchased at home (grocery shop or supermarket) climbed 1.4 percent from January to February 2022, and was 8.6 percent higher than February 2021.
Increases in food prices are likely to be higher than those seen in 2020 and 2021. Food prices at home are expected to rise between 3.0 and 4.0 percent in 2022, while food prices away from home are expected to rise between 5.5 and 6.5 percent. In 2021, price increases for food outside the home are likely to outpace historical averages and inflation.
Food prices at home and food prices away from home both climbed at similar rates between the 1970s and the early 2000s. However, their growth rates have largely differed since 2009; although food-at-home prices deflated in 2016 and 2017, monthly food-away-from-home prices have been steadily increasing since then. The disparity stems in part from the expense of providing cooked food in restaurants versus the cost of selling food in supermarkets and grocery shops.
Food prices at home will rise 3.5 percent in 2020, while food prices away from home will rise 3.4 percent. The significant rise in food-at-home costs fueled this convergence, while food-away-from-home price inflation remained within 0.3 percentage points of the 2019 inflation rate. The meat categories saw the biggest price increases: beef and veal prices rose 9.6%, pig prices rose 6.3 percent, and poultry prices rose 5.6 percent. Fresh fruits were the only category to see a price decline in 2020, by 0.8 percent.
Food prices at home rose 3.5 percent in 2021, while food prices away from home rose 4.5 percent. In 2021, the CPI for all foods grew by 3.9 percent on average. The beef and veal category had the biggest relative price increase (9.3%) of all the CPI food-at-home categories examined by the USDA’s Economic Research Service (ERS), while the fresh vegetables category had the fewest (1.1 percent). In comparison to 2020, no food categories had price decreases in 2021.
This month, the ranges for 11 food categories and six aggregate categories were revised upward. Other meats, poultry, eggs, dairy products, fats and oils, fresh fruits, processed fruits and vegetables, sugar and sweets, cereals and bakery products, nonalcoholic beverages, and other foods, as well as the aggregate categories of all food; food away from home; food at home; meats, poultry, and fish; fruits and vegetables; and fresh fruits and vegetables, were all revised upward. Only the category of fresh veggies received a reduction.
In February 2022, there were significant rises in all-food, food-away-from-home, and food-at-home prices, following similar major changes in January. Rather than a few or a few food categories, these price increases were the result of increases across the board. While prices for all reported food price categories were unchanged in February, prices for 11 disaggregated food categories climbed by more than a percent. The effects of the Ukraine conflict and the Federal Reserve’s recent interest rate hikes are likely to put upward and downward pressure on food prices, respectively. The situations will be closely observed as they develop in order to assess the net effects of these concurrent developments on food prices. In 2022, all food prices are expected to rise between 4.5 and 5.5 percent; food prices away from home are expected to rise between 5.5 and 6.5 percent; and food prices at home are expected to rise between 3.0 and 4.0 percent.
With historically low frozen chicken stockpiles (also known as “cold storage”), retail poultry prices have been high. In February 2022, egg prices climbed by 2.2 percent. An ongoing outbreak of highly pathogenic avian influenza could lead to price rises in chicken and eggs due to limited supply, or price decreases due to decreasing international demand for U.S. poultry products or eggs. The impact of the outbreak on prices will be tracked in future Food Price Outlook reports. Poultry costs are now expected to rise by 6.0 to 7.0 percent, while egg prices are expected to rise by 2.5 to 3.5 percent.
Increases in retail prices have been driven by rapid increases in dairy product consumption in recent months. In February 2022, the trend continued with a 1.6 percent increase in retail dairy product prices. In 2022, dairy product prices are expected to rise by 4.0 to 5.0 percent.
Forecast ranges for fats and oils, fresh fruits, processed fruits and vegetables, sugars and sweets, cereals and bread items, nonalcoholic drinks, and other foods have been modified upwards following major price rises in January and February. Prices for fats and oils are expected to rise by 6.0 to 7.0 percent; fresh fruit prices are expected to rise by 5.0 to 6.0 percent; processed fruit and vegetable prices are expected to rise by 4.5 to 5.5 percent; sugar and sweets prices are expected to rise by 3.0 to 4.0 percent; cereals and bakery product prices are expected to rise by 3.0 to 4.0 percent; and nonalcoholic beverage prices are expected to rise by 3.0 to 4.0 percent. Fresh fruits and vegetables are expected to climb between 3.0 and 4.0 percent, while the aggregate categories of fruits and vegetables are expected to increase between 3.5 and 4.5 percent.
In February 2022, fresh vegetable prices remained unchanged, which was slower than predicted. Fresh vegetable costs are expected to rise between 1.0 and 2.0 percent, down from 1.5 to 2.5 percent previously.
A Producer Price Index (PPI) is similar to a Consumer Price Index (CPI) in that it tracks price changes over time. A PPI, on the other hand, is a measure of the average prices paid to domestic producers for their goods, rather than retail prices. Nearly every industry in the goods-producing sector of the economy has a PPI. Food markets are interested in three primary PPI commodity groups: unprocessed foods and feedstuffs (previously known as crude foods and feedstuffs), processed foods and feeds (formerly known as intermediate foods and feeds), and final consumer foods. These groupings provide a general notion of pricing variations in the US food supply chain at various levels of production.
The PPIs, which track changes in farm and wholesale prices, are often far more volatile than the CPIs that follow them. As products move from the farm through the wholesale sector to the retail sector, price volatility lessens. The CPI often lags moves in the PPI because to the various processing stages in the US food system. As a result, the PPI is a good tool for predicting what will happen to the CPI in the near future.
The USDA’s Economic Research Service does not anticipate PPIs for unprocessed, processed, or finished foods and feeds at the industry level. These costs, on the other hand, have historically had a high association with the CPIs for all foods and food at home.
This month, the PPI projection ranges for farm-level cattle, wholesale poultry, wholesale dairy, farm-level soybeans, wholesale fats and oils, farm-level fruits, farm-level vegetables, farm-level wheat, and wholesale wheat flour were all raised. Wholesale beef forecast ranges have been lowered.
Cattle prices on farms increased 6.8% in February 2022, putting them 24.7 percent higher than they were in February 2021. Beef prices, on the other hand, fell by -2.9 percent. In 2022, farm-level cattle prices are expected to rise by 12.5 to 15.5 percent. Prices for wholesale beef are expected to rise by 4.0 to 7.0 percent.
In February 2022, wholesale poultry prices grew by 4.1 percent, totaling a 26.5 percent rise over February 2021 prices. Highly pathogenic avian influenza might put upward or downward pressure on chicken prices by reducing production or restricting access to foreign markets. In 2022, wholesale poultry prices are expected to rise by between 9.0 and 12.0%.
On robust domestic and international demand, wholesale dairy prices grew by 2.0 percent in February 2022. In 2022, wholesale dairy prices are expected to rise between 7.0 and 10.0 percent.
In February 2022, farm-level soybean and wholesale fats and oils prices both increased by 11.4 and 6.0 percent, respectively. Oil prices have risen due to low production and stocks around the world. In 2022, farm-level soybean prices are expected to rise by 8.5 to 11.5 percent. Prices for wholesale fats and oils are expected to rise by 27.0 to 30.0 percent.
In February, farm-level fruit prices jumped by 4.5 percent. In February 2022, farm-level vegetable prices fell 9.4%, but they were still 17.5% higher than in February 2021. In 2022, farm-level fruit prices are expected to rise by 12.5 to 15.5 percent, while farm-level vegetable prices are expected to rise by 6.0 to 9.0 percent.
In February 2022, farm-level wheat and wholesale wheat flour prices both climbed by 1.3 percent. International wheat markets are projected to be under pressure as a result of the situation in Ukraine. In 2022, farm-level wheat prices are expected to rise by 20.0 to 23.0 percent, while wholesale wheat flour prices are expected to rise by 12.0 to 15.0 percent.
See World Agricultural Supply and Demand Estimates at a Glance for official USDA farm-level price projections. See the USDA Economic Research Service Outlook publications on Livestock, Dairy, and Poultry, Oil Crops, Wheat, Fruit and Tree Nuts, and Vegetables and Pulses for more information, thorough explanations, and analysis of farm-level prices.
Will food costs in 2022 rise?
As the first quarter of 2022 draws to a close, Americans continue to endure rising inflation that shows no signs of abating in the near future. The cost of food grew by 7.9% between February 2021 and February 2022, according to the United States Department of Agriculture (USDA). And, while it was the highest rate of food inflation in more than 40 years, Trading Economics predicts that both grocery and restaurant prices will continue to rise.
According to the USDA’s March 2022 forecast report, the cost of food at home (defined as everything purchased at a grocery store) is expected to rise by another 3-4 percent. Food purchased outside of the home (or at a restaurant) is expected to increase by 5.5-6.5 percent. Restaurant food prices are predicted to rise to new heights as a result of these hikes, outpacing inflation rates from the previous year. Trading Economics forecasts that food inflation would moderate to roughly 2% in 2023 and 2024, according to Trading Economics. However, they expect that inflation would wind up being approximately 8.9% in the first quarter of 2022.
With such high inflation forecasts, it may be useful to know which food categories would be the most affected. In case you’d like to plan to cut back in the coming months, the USDA has provided its estimates for both grocery categories and costs of food sourced by restaurants.
What foods are immune to inflation?
Inflation continues to wreak havoc on grocery retailers in the United States. Grocery prices rose 7.4% in January compared to the same month the previous year, the fastest increase since 2008.
However, not all foods have been affected equally by inflation. Potatoes, cheese, tea, tomatoes, spaghetti, bread, ice cream, and fresh, processed, and frozen veggies are among the pantry staples that have remained stable.
What are the most inflated items?
Prices for things like gasoline and airline have skyrocketed in the last year, owing in part to a lack of demand during the start of the pandemic (used cars and trucks, for example, saw a 41.2 percent price increase from February 2021 to February 2022).
Prices are rising across the board, with little variation between regions. According to the CPI report, prices in the South increased by 8.4 percent year over year, with the Midwest following closely behind with a rise of 8%.
RELATED: Inflation: Gas prices will get even higher
Inflation is defined as a rise in the price of goods and services in an economy over time. When there is too much money chasing too few products, inflation occurs. After the dot-com bubble burst in the early 2000s, the Federal Reserve kept interest rates low to try to boost the economy. More people borrowed money and spent it on products and services as a result of this. Prices will rise when there is a greater demand for goods and services than what is available, as businesses try to earn a profit. Increases in the cost of manufacturing, such as rising fuel prices or labor, can also produce inflation.
There are various reasons why inflation may occur in 2022. The first reason is that since Russia’s invasion of Ukraine, oil prices have risen dramatically. As a result, petrol and other transportation costs have increased. Furthermore, in order to stimulate the economy, the Fed has kept interest rates low. As a result, more people are borrowing and spending money, contributing to inflation. Finally, wages have been increasing in recent years, putting upward pressure on pricing.
Inflation favours whom?
- Inflation is defined as an increase in the price of goods and services that results in a decrease in the buying power of money.
- Depending on the conditions, inflation might benefit both borrowers and lenders.
- Prices can be directly affected by the money supply; prices may rise as the money supply rises, assuming no change in economic activity.
- Borrowers gain from inflation because they may repay lenders with money that is worth less than it was when they borrowed it.
- When prices rise as a result of inflation, demand for borrowing rises, resulting in higher interest rates, which benefit lenders.
Is inflation expected to worsen by 2022?
According to a Gallup poll, a record 79 percent of Americans believe inflation will continue to climb in 2022, with half of those polled believing that prices will rise “a lot” more.