USDA's Economic Research Service (ERS) reports the all-items Consumer Price Index (CPI), which measures economy-wide inflation, fell 0.3% in October from the month prior and it now stands 1% above year-ago levels. The CPI for all food, on the other hand, rose 0.1% in October to stand 1.3% above year-ago levels.
The food at home (grocery store food items) CPI rose 0.2% in October and is up 0.8% from year-ago. So far this year, the food-at-home CPI has fallen 0.1% since January. The food-away-from-home (restaurant purchases) CPI rose 0.1% in October and it stands 1.9% above October 2012 levels.
Based on current conditions, ERS's inflation forecast for 2013 calls for increases of 1.5% to 2.5% for all food prices. It expects food at home prices to increase 1% to 2%. This signals prices are likely to increase less than they did in 2012 and that annual inflation would again be below the 20-year historical average of 2.8%.
ERS explains "the impact of the 2012 drought on retail food prices has been less than initially forecast. The inflationary pressure of the drought has been offset by factors such as decreased exports of many U.S. agricultural products, a stronger U.S. dollar, low energy price inflation and decreased prices for many commodities unaffected by the drought."
Looking ahead to 2014, ERS expects food price inflation will moderate to a level closer to the historical norm, based on expectations for inflationary pressures to moderate and given the outlook for commodity prices, animal inventories and ongoing export trends. Therefore, it expects the food, food-at-home and the food-away-from-home CPI will increase 2.5% to 3.5% over 2013 levels.
"This forecast is based on an assumption of normal weather conditions; however, a resurgence of the drought in key agricultural areas or other severe weather events could potentially drive up food prices beyond the current forecasts," ERS details.
Get more details on food-category CPI forecasts.