The government lowered its forecast of grocery inflation this year to a barely noticeable 0.25 percent, due to ample meat supplies, and in its first forecast of the coming year, estimated grocery prices would rise by 1.5 percent in 2018. It would be the fourth year in a row of lower-than-average growth in retail food prices.
“Looking ahead to 2018, retail food prices are expected to rise between 1.0 to 2.0 percent,” said USDA’s monthly Food Price Outlook. “While fats and oils and processed fruits and vegetables could potentially decline in price, prices for meats, eggs and dairy are expected to increase.”
Cattle producers are sending more cattle, fed to heavier weights, to slaughter than last year. Combined with a large stockpile in freezer plants, “this higher production … resulted in downward pressure on prices,” said USDA economists. “Lower beef prices are most likely adding pressure to lower pork prices.” With beef and pork prices edging downward, USDA revised its forecast of grocery price increases to 0.25 percent this year, compared to its previous forecast of 0.50 percent.
Retail prices for red meats are forecast to decline this year and to rise by 2 percent in 2018. The combined category of meat, poultry and fish accounts for one-fifth of grocery spending.
Over the past 20 years, grocery prices have risen by an average 2.2 percent annually. They declined by 1.3 percent in 2016, the first instance of food deflation since 1967. The inflation rate in 2015 was 1.3 percent and in 2014, 2.4 percent.