Recent declines in the retail price of beef, veal, poultry and eggs are contributing to a 1 percent drop in grocery prices this year, the largest instance of food deflation since 1959, said the Agriculture Department. Going into the final month of the year, grocery prices are running 1.2 percent below their 2015 level, thanks to the strong dollar and low petroleum prices.
Ordinarily, grocery prices rise by 2.5 percent a year. If USDA’s forecast of a 1 percent year-on-year decline in grocery prices proves true, it would be “the first year since 1967 that retail food prices could reflect annual deflation.” A nominal increase of 1 percent is forecast for the new year. “Poultry, fish and seafood, and dairy prices are expected to rise in 2017,” said USDA in its monthly Food Price Outlook.
Groceries account for nearly 59 cents of every dollar spent on food. The rest goes to snacks, carry-out food, restaurant meals and food served in institutional settings. The price of “food away from home” is forecast to rise by 2.5 percent this year and next, a fairly average increase.
The overall U.S. food inflation rate is forecast for 0.75 percent this year, lowest since 0.8 percent in 2010, and for 2 percent in 2017. The 20-year average is a 2.6 percent increase.