Consumers still paid an average 11.8% more for food purchased at U.S. grocery stores than a year earlier, according to December Consumer Price Index data released on Thursday.
Consumers have seen some relief at gas stations over the past few months. Fuel prices fell 9.4% month-on-month in December and were 1.5% cheaper than in December 2021, according to the US Bureau of Labor Statistics (BLS).
Overall food prices rose 0.3% MoM and 10.4% YoY in December. Egg prices are up 60% from a year ago, leading to higher grocery prices. Butter prices rose 31.4 percent for the year in December to an average of $4.81 a pound. The cost of butter substitutes such as margarine rose 43.8% in December, down slightly from 47.4% in November, the BLS reported.
Kroger CEO Rodney McMullen said on CNBC this week that the rise in egg prices is directly related to bird flu, which has forced the killing of millions of laying hens and led to a shortage of eggs. The benefit of chickens is that they have a shorter growth cycle compared to other animals and are one of the fastest replenishing animals, he said. He said layers are being replenished and there may be some additional supply of eggs by late spring. Cal-Maine, the largest U.S. egg producer, said more than 43 million birds slaughtered this week due to bird flu were layer hens. Egg supplies in mid-December were down 20 percent from a year earlier and were the lowest since 2014.
Steve Morrow, manager of Allen’s Foods in Bella Vista, said he has never seen egg prices this high in his 47 years in the grocery business.
“As a result of our expanded gluten-free section in our store, we’ve worked with many smaller suppliers. Because of my supplier relationships, I was able to find suppliers and get them for $1 a dozen cheaper than any of my competitors Eggs available. Clearly Cage-free brand eggs are doing well in the store,” Morrow said.
The cost of lettuce rose 4 percent between November and December, while meat prices rose 1 percent in December from the previous month, the Labor Department said. Cereals and baked goods prices rose 16.1 percent year-over-year, meat and chicken prices rose 7.7 percent, and dairy and related products rose 15.3 percent.
McMullen said food inflation was made worse by higher costs for corn and other grains due to Russia’s invasion of Ukraine, higher transportation costs and a severe drought in Brazil that saw crop production fall 33 percent last year. Companies that were slower to pass on costs are doing so now. Consumers are shopping smarter than in decades past, looking for value and sales to stretch their budgets, Morrow said.
“When I first started in the grocery business, people were shopping from lists and rarely deviated. I saw more shopping with purpose, promotions and stockpiling,” he added.
According to the CPI report, in addition to the increase in grocery prices, prices did fall in some parts of the economy. Overall prices in December fell 0.1% month-on-month and rose 6.5% year-on-year. Prices of used cars in December fell 2.5% from November and 8.8% from a year earlier. Housing costs rose 0.8% month-on-month and 7.5% year-on-year in December. Transportation costs rose 0.2% month-on-month and 14.5% year-on-year.