U.S. food prices will rise a scant 1.5 percent this year, continuing a three-year run of below-normal food inflation rates, said a USDA forecast, pointing to grocery store prices that are at a near standstill. Restaurant and fast-food prices — “food away from home” — would climb at a normal rate of 2.5 percent this year.
Grocery prices account for nearly 58 cents of the food dollar, reducing the impact of higher prices for sit-down and carry-out meals. Food comprises from 25 to 35 percent of meal costs at restaurants, according to analyst Bill Lapp. Labor and real estate costs have much more influence on restaurant prices.
Over the past 20 years, U.S. food prices rose by an average of 2.4 percent annually. The increase, however, was just 1.9 percent in 2015, 0.3 percent in 2016, and 0.9 percent in 2017, due to remarkably little growth in supermarket prices. In fact, grocery prices fell in both 2016 and 2017.
In its monthly Food Price Outlook, the USDA’s Economic Research Service lowered its forecast of the overall food inflation rate to 1.5 percent, from its previous estimate of 2 percent for this year. It also lowered the forecast of retail food inflation to 1 percent from the previous projection of 1.5 percent. Beef prices should rise less than previously expected because of increased cattle production. Pork prices are forecast to remain flat in 2018.
“Due to deflation in 2016 and 2017, expected [retail] price increases would still leave overall price levels in 2018 lower than in 2017,” said the ERS.