Early in the pandemic, one concern for U.S. households was the rising price of food amid widespread job losses, a reduction in hours worked and declining incomes. Now, one year later, that concern has eased as we gain some perspective on the trajectory of overall prices in general and food prices in particular.
While many global supply chains, including those for food, remain somewhat constrained, it would appear that the increase in food prices—which topped out at 4.5% last June—is in the rearview mirror.
Food prices increased by 3.5% in March, according to recent government data, and those increases are likely to become more muted as global supply chains move back toward full production in the near term.
In some respects, last year represented the perfect storm for food prices. The combination of the trade war with China, mass flooding and then the adverse impact of the pandemic sent food prices soaring from a 1.8% year-over-year increase before the pandemic to the 4.5% metric captured last summer.
Although food prices tend toward volatility for a host of reasons, we now expect them to trend back toward the long-term average increase of 2.4%.
Given the month-to-month volatility in food prices, one should anticipate the components that comprise the food basket in the Consumer Price Index to change and not always reflect the top-line number.
These components have different weightings in the estimated basket. In March, food-at-home prices increased 3.3% on a year-ago basis; cereals and bakery products rose 2.6%; meats, poultry and eggs were up 5.4%; dairy 1.6%; fruits and vegetables 3.8%; other food-at-home 2.2%; non-alcoholic beverages 3.2%; and food away from home 3.7%.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
