November brings break in grocery pricing

After a prior-month hiccup, grocery prices relaxed sequentially and reined in overall food inflation as the Consumer Price Index (CPI) remained flattish for November.

The November CPI for All Urban Consumers inched up 0.1% (seasonally adjusted) month over month, following no gain in October, the U.S. Bureau of Labor Statistics (BLS) reported Tuesday. That two-month plateau came after upticks of 0.4% in September and 0.6% in August interrupted readings of 0.2% in both July and June and 0.1% in May.

Monthly growth in the CPI has held below 1% since the summer of 2022, with sequential results over the balance of the past year coming in at 0.4% in April, 0.1% in March, 0.4% in February, 0.5% in January and, in 2022, at 0.1% in December and 0.2% in November.

Annually, the November CPI ticked down to 3.1% (unadjusted) from 3.2% in October, returning the year-over-year trend to the downward slope. The inflation levels in September (3.7%), August (3.7%) and July (3.2%) had broken a string of year-over-year declines going back over 12 months, including 3% for June, 4% for May, 4.9% for April, 5% for March, 6% for February, 6.4% for January and, in 2022, was up 6.5% for December, 7.1% for November, 7.7% for October, 8.2% for September, 8.3% for August, 8.5% for July and 9.1% for June.

Related:Inflation worries softening, but shoppers still looking for deals

Core inflation held relatively steady. Excluding food and energy, the November CPI was up 4% from a year ago and 0.3% month to month, the same as the 4% annual reading and just over the 0.2% sequential uptick for October. On a monthly basis, core inflation has averaged less than 0.3% since May.

“The Fed will be pleased with this print [of the November CPI] and will hold rates steady at the conclusion of the December FOMC meeting tomorrow. However, as Chair [Jerome] Powell said last month, future progress on inflation will be ‘lumpy’ and ‘bumpy,’” Erik Lundh, principal economist at business think tank The Conference Board, stated Tuesday in a brief on the November CPI data.

“We expect the Fed to close in on its 2% year-over-year inflation target by the end of next year,” Lundh added. “We also expect the U.S. economy to cool significantly in early 2024 under the weight of elevated interest rates. As such, the Fed is likely to start lowering rates in mid-2024 at a pace of 25 basis points per meeting.”

Source: U.S. Bureau of Labor Statistics

Food-at-home back on downward track

Grocery pricing also looks to be headed back down. The food-at-home CPI edged up just 0.1% sequentially in November, down from 0.3% increase in October that had marked the largest gain since July, which was followed by upticks of 0.1% in September and 0.2% in August.

Related:Disinflation impacts Kroger’s 3rd quarter sales

Monthly growth in the food-at-home CPI has stayed below 1% since a 0.8% increase in August 2022. The 2023 calendar year had started with month-to-month grocery pricing gains of 0.4% in January and 0.3% in February before decreases of 0.3% in March and 0.2% in April—representing the first shrinkage since September 2020, BLS said—and then a 0.1% rise in May and a flat reading in June.

Year over year, food-at-home inflation sank to 1.7% in November from 2.1% in October. That maintained steadily falling levels this year from 2.4% in September, 3% in August, 3.6% in July, 4.7% in June, 5.8% in May, 7.1% in April, 8.4% in March, 10.2% in February and 11.3% in January. Those declines had extended a slide from 13.5% in August 2022.

“The November CPI demonstrates that the inflation rate for food-at-home continues to head in the right direction for American consumers, dropping to 1.7% on a year-over-year basis,” Andy Harig, vice president of tax, trade, sustainability and policy development at FMI-The Food Industry Association, said in emailed comments on Tuesday. “But even as inflation gets back on par with historical averages, consumers must remain flexible and tactical with their purchasing decisions to get the greatest value as we head into the holiday season.”  

Related:October brings hiccup in food-at-home inflation

Of the six major grocery store food group indices for food-at-home, two experienced month-over-month decreases for November on a seasonally adjusted basis: meat, poultry, fish and eggs (-0.2%) and other food-at-home (-0.1%). Categories posting monthly increases included cereals and bakery products ( 0.5%), nonalcoholic beverages ( 0.5%), fruit and vegetables ( 0.3%), and dairy and related products ( 0.1%).

On a year-over-year basis (adjusted), just one of the six categories saw a decrease: dairy and related products, down 1.4%. Cereals and bakery products ( 3.4%), other food-at-home ( 3.3%) and nonalcoholic beverages ( 2.9%) saw notable annual increases, while fruit and vegetables ( 0.4%) and meat, poultry, fish and eggs ( 0.1%) had only fractional gains.

“The good news is, buying ingredients and preparing meals at home continues to be the most economical option for Americans looking to stretch their food dollar further, especially when it comes to holiday meal celebrations. And shoppers have clearly taken notice,” Harig explained. “FMI’s ‘U.S. Grocery Shopper Trends: Holiday Season’ research notes that 31% of consumers say they are preparing meals at home more often, while more than half plan to cook and eat more meals at home in the coming year. As the trend towards preparing more meals at home continues, 60% of shoppers report that they are eating out less, and just 14% of shoppers say they plan to dine out more in 2024.”

Source: U.S. Bureau of Labor Statistics

Plateau for restaurant pricing?

Overall, the food CPI—including food-at-home and food-away-from-home—was up 2.9% year over year for November, down from 3.3% in October and 3.7% for September. Those levels continued steady annual declines from gains of 4.3% in August, 4.9% in July, 5.7% in June, 6.7% in May, 7.7% in April, 8.5% in March, 9.5% in February and 10.1% in January.

Month to month in November, the food index ticked up 0.2% after increases of 0.3% for October and 0.2% for September, August and July. Those readings came after upticks of 0.1% in June and 0.2% in May, flat results in April and March, and growth of 0.4% in February and 0.5% in January, BLS data showed. The food CPI hasn’t hit the 1% growth mark since climbing 1.1% in July 2022.

Restaurant and foodservice price inflation seems to have plateaued in recent months despite declining year-over-year growth. The food-away-from-home CPI was up 0.4% in November, the same as in October and September and above increases of 0.3% in August and 0.2% in July. Those numbers compared with growth of 0.4% in June, 0.5% in May, 0.4% in April and 0.6% in March, February and January.

Prices for food-away-from-home rose 5.3% year over year for November—about the same as the 5.4% annual growth for October. Those levels were below the 6% reading for September and continued a mostly downward trend from 6.5% in August, 7.1% in July, 7.7% in June, 8.3% in May, 8.6% in April, 8.8% in March, 8.4% in February and 8.2% in January.

“According to the USDA’s ‘Food Dollar Series,’ which examines how various sections of the food supply chain contribute to the overall cost of food for consumers, food retail accounts for only 12.4 cents of the costs that go into every dollar that consumers spend on food, compared to 34.1 cents per dollar for restaurants,” Harig reported. “While average weekly grocery spend is up slightly year over year ($155/week in October 2023 compared to $148/week in October 2022), shoppers report they are buying more groceries rather than dining out as a way to moderate their food spending.”