Slowing Food Inflation is Good News for Consumers

Food prices have been on a roller coaster ride over the past several years. The grocery store is one of the first and most noticeable places consumers feel the sting of inflation. The same is true of restaurant pricing. Over the past few years, consumers have responded by changing their eating and spending habits, limiting purchases of certain items, not eating out as often or at all, relying on coupons, and setting strict food budgets.

If you’ve been feeling the pinch at the grocery store, or have had to make changes to your lifestyle in response to higher food prices, good news could be on the horizon. Food inflation is showing signs of slowing. According to the New York Times, companies are rethinking their pricing strategies in response to consumer behaviors:

After months of rapid increase, the cost of food at home climbed at a notably slower clip in January. And from packaged food providers to restaurant chains, companies across the food business are reporting that they are no longer raising prices as steeply. In some cases that’s because consumers are finally pushing back against price increases after years of spending through them. In others, it’s because the prices that companies pay for inputs like packaging and labor are no longer rising as sharply. …

Some companies seem to be following the rest of the economy back to more moderate price changes. Overall inflation, as measured by the Consumer Price Index, peaked at 9.1 percent in summer 2022 but slowed to just 3.1 percent at the start of this year, while food commodity costs like beef, grains and some kinds of dairy have been easing. …

Many companies have taken advantage of inflation to pad profits, but for the past several years, some portion of grocery and restaurant price increases has been aimed at covering higher costs. Wages have been rising rapidly in the hospitality and retail sectors, and key ingredients had been expensive amid supply chain problems, Russia’s invasion of Ukraine and bouts of avian flu.

Companies typically at least try to raise prices when the cost of doing business climbs to avoid losing profits. But as wage and input cost pressures begin to fade, companies can stop aggressively lifting prices without risking a hit to their bottom line. …

Taken together, the signs suggest that grocery and restaurant inflation is likely to prove more moderate in 2024 than it was in the previous three years.

Many food-related input costs are either coming down or jumping less aggressively. Wage gains remain elevated in food service, but they are cooling back toward normal. And consumers are beginning to push back on the kind of big price increases that firms were using to pad their profit margins.

You can read the full article here.

Of course, setting and sticking to a budget always makes smart financial sense. However, just as you make adjustments when your income changes, the same can be true when expenses rise or decrease. Slowing food inflation could mean you can start making some different decisions. Maybe you’ll choose to pay off debt or put money into savings each month. Increase your contributions to your 401(k). Or start having date nights again. With the majority of Americans live paycheck to paycheck, any break from inflation is sure to be welcome news.