January CPI: Food-at-Home Inflation Decelerates

Inflation for food-at-home ticked down in January year over year, with prices at grocery stores climbing 3.7% in the month vs. the 3.9% acceleration they recorded in December.

The meat, poultry, fish and eggs category was the winner in terms of pricing power for the month, with protein prices rising 5.1% year over year, according to the Bureau of Labor Statistics' (BLS) January consumer price index report, released Feb. 10. That's compared with a 4.6% increase in meat, poultry, fish and egg prices in December, which was the lowest increase the category recorded since March. As consumers stocked their freezers and fridges with meat in the early months of the COVID-19 pandemic and the supply chain was slowed slowed by processing plant outbreaks, inflation for the category was as high as 10% in May and 12.8% in June.

Cereals and bakery products, which never saw year-over-year prices climb more than 3.3% in 2020, saw inflation decelerate in January to 2.5%, down from 3.2% in December. 

Dairy and fruit/vegetable consumer price hikes also slowed in January, to 3.8% and 2.7%, respectively. In December, consumer prices rose 4.4% for dairy and 3.2% for produce. 

Regionally in January, consumer food-at-home prices climbed 4.8% year over year in the West vs. 2.9% in the Northeast, 3% in the Midwest and 3.7% in the South. 

Food-away-from-home prices, in comparison, rose 3.9% year over year (not seasonally adjusted) in January. Analysts from MKM Partners, in a note to clients on the BLS report, stated: "As restaurants reopen more broadly, we expect national food-at-home inflation to come down"—the idea being that when consumers have more options as far as actually going out to eat, supermarkets' pricing power will come down.

Broadly in the economy, consumer prices minus food and energy were unchanged overall in January, the BLS reported. Gas prices were up 7.4% in January over December, though they were still down 8.6% year over year.