The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, rose 0.4% in January from the month prior to stand 1.6% above year-ago, according to USDA's Economic Research Service (ERS). The CPI for all food rose 0.4% between December and January to stand 1.1% above year-ago levels.
Specifically, the food-at-home (grocery store food items) CPI rose 0.7% in January, bringing it to stand 0.9% above January 2013. From 20012 to 2013, the food-at-home CPI rose just 0.9% -- the smallest year-over-year increase in decade. The food-away-from-home (restaurant purchases) CPI rose 0.1% from December to January to stand 2% above year-ago levels.
ERS expects food price inflation will return to a range closer to the historical norm in 2014, after retail food prices were flat in 2013. "Inflationary pressures are expected to be moderate, given the outlook for commodity prices, animal inventories and ongoing export trends. Retailer margins, having contracted since the drought, may expand in 2014 if input prices rise, which should contribute to inflation," ERS elaborates.
Therefore, ERS forecasts the food, food-at-home and food-away-from home CPIs will increase 2.5% to 3.5% from 2013 levels. This assumes normal weather conditions. ERS does note, however, that severe weather could drive prices above current figures. Specifically, it says the drought in California could have "large and lasting effects on fruit, vegetable, dairy, and egg prices."
In sum, ERS made no changes to its CPI forecasts this month. Get more details.