High grocery bills are here to stay.
Food prices were generally unchanged month-on-month in April, while food inflation rose 2.2% year-over-year, according to the U.S. Bureau of Labor Statistics.
Grocery prices jumped 1.1% compared to last year, but fell 0.2% compared to March.
“Grocery store prices are starting to flatten somewhat,” BLS economist Steve Reed told Yahoo Finance. “This month, it’s been a mixed bag with some ups and some downs.”
Reid added that price growth is returning to pre-pandemic levels, with volatility mainly found in specific categories affected by temporary supply issues.
Wage growth can also lead to price changes, because it adds a cost to producers. However, “1% to 2% year-over-year food price growth is normal,” said Michael Swanson, chief agricultural economist at Wells Fargo.
Food inflation is expected to “stay” in this lower range, reflecting the wages of those who produce the food.
“That’s what the Fed, the Fed, is watching [is] “We need wage growth and price growth to come back into balance around our 2% target, and food is doing its part — better than some other sectors,” Swanson said.
Items that saw the biggest monthly jump included butter, which rose 4.3%; Flour and prepared flour mixture 3.2%; and breakfast cereals, 3.1%.
Frozen juices and non-carbonated beverages saw the largest year-over-year jump across the entire CPI report, up 29.2%. According to Reid, this is the largest increase ever for this category, which represents a challenge for the industry.
“American consumers are doing better in the sense that wages are rising relative to inflation and purchasing power is somewhat stabilizing… and lower-income consumers are under a little more stress,” Coca-Cola (KO) CEO James Quincey told Yahoo Finance. “. pressure, and look more clearly for value.”
Coca-Cola’s unit volume rose 1% in the first quarter.
Egg prices, which many fear will skyrocket due to a few cases of bird flu, fell 7.3% last month. A dozen large, top-grade eggs cost $2.86. Swanson expects prices to remain low as producers weather any bird flu outbreaks in the spring.
This new CPI reading comes as a group of 40 lawmakers, led by Senator Elizabeth Warren, called on US President Joe Biden to investigate grocery store chains for price gouging. In the letterThey urged the president to take action to reduce food costs.
The cost of eating out drove overall food inflation higher in April. Eating out from home jumped 4.1% compared to last year.
However, this is the 14th straight month of “sequential deceleration,” according to a note from JPMorgan analyst Ken Goldman, as the pace of growth slows.
Swanson says prices should come down soon.
“There will be further decline in this category. They cannot continue to operate at a rate four times higher than the rate of inflation and feed at home,” he said.
On a monthly basis, dining out increased by 0.3%. Many had expected a larger increase as commodity costs and labor inflation continue to rise, especially in California, where the FAST Act raised the minimum wage to $20 an hour on April 1.
Global chains such as Starbucks (SBUX) and McDonald’s (MCD) have seen US consumers pull back on spending. In their latest quarterly results, both chains missed sales growth expectations from the Street.
“Rising rents, food and energy prices are weighing on low- and middle-income households, a downside risk to our upbeat consumer spending outlook for the remainder of this year,” Ryan Sweet, chief US economist at Oxford University, said in a note to clients.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke De Palma Or email her at [email protected].
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