USDA's Economic Research Service lowered its inflation forecast for both all food and foot-at-home (grocery store) prices in 2013 to a 2.5% to 3.5% increase, which compares to its March forecast for a 3% to 4% increase. This means that prices are likely to increase this year more so than in 2012 when food prices were mostly flat, but overall inflation is now expected to be near the historical average for both indexes.
ERS details that it expects inflation to remain strong -- especially for the first half of 2013 -- for most animal-based food products due to high feed prices. But it expects normal or below-normal inflation levels for categories not directly affected by the 2012 drought.
The CPI for all food in March was unchanged from February but up 1.5% from year-ago. The food-at-home CPI declined by 0.1% in March, but the index is still up 1% from last year. The food-away-from home (restaurant) index rose 0.2% in March from the month prior and it is now up 2.3% from March 2012. The all-items CPI rose 0.3% in March from February, bringing the index to a 1.5% increase from last year at that time.
ERS explains, "The overall direction of prices in 2013 continues to be mixed, and the food-at-home CPI is unchanged for the first quarter of the year."
Get more details about ERS's food price outlook here.