Food prices surged by 6.3 percent during 2021, nearly three times the usual rate of annual increase, but food inflation is expected to decrease this year, said the American Enterprise Institute on Tuesday. Retail prices for beef and pork “show signs of weakening,” and many commodity prices are forecast to decline late this year following large global harvests, said an AEI paper.
“Much uncertainty remains because of the potential for further disruptions associated with the Covid-19 pandemic,” said the paper, written by economists Joe Glauber and Vince Smith. Like other analysts, they said food prices spiked in 2021 due to supply chain disruptions and labor shortages. Reversion to the long-term food inflation rate of 2 to 3 percent “will depend more on how well the supply chain recovers from Covid-19 and whether the overall rate of price increases in energy and labor markets moderates in 2022,” the economists said.
“While the food CPI accounts for just 14 percent of the overall CPI, like gasoline prices, food prices are highly visible indicators of inflation for many households, especially those with moderate and low incomes.”