The Economic Research Service reports the Consumer Price Index stands at 1.4% over year-ago in September, unchanged from last month. The food-at-home (grocery store food items) CPI was also unchanged for September and is up 1% over the year-prior, while the food-away-from home (restaurant purchases) CPI rose 0.1% for the month to stand 1.9% above year-ago. This resulted in a 0.1% uptick in the all-items CPI for the month of September, bringing the index to 1.2% over year-ago.
"Food price inflation remains relatively mild through the first three quarters of 2013, increasing 0.9%," ERS explains, continuing, "Due to the relative stability in food prices in September, there are no changes to ERS's 2013 or 2014 CPI forecasts."
ERS forecasts inflation for all food at 1.5% to 2.5% for 2013, with food-at-home prices predicted to increase 1.0% to 2.0% percent. This implies prices would likely increase less than they did in 2012 and that annual inflation would fall below the 20-year historical average of 2.8%.
"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," ERS elaborates.
Looking ahead to 2014, ERS expects food price inflation will return to a range closer to the historical norm. "Inflationary pressures are expected to be moderate, given the outlook for commodity prices, animal inventories, and ongoing export trends," ERS explains. Therefore, ERS expects the food, food-at-home, and food-away-from-home CPIs to increase 2.5% to 3.5% percent over 2013 levels.
Keep in mind, his 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.
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