Grocery prices will virtually stand still in 2017, the second year in a row of unusually low food-price inflation with lower beef and pork prices a factor, says the government. Retail food prices are estimated to rise 1 percent in the new year after falling 0.75 percent this year; typically grocery prices rise 2.5 percent a year.
The year-on-year decline in grocery prices would be the first instance of food-price deflation since 1967. “Retail food prices have remained flat or decreased for eight of the first 10 months in 2016,” said USDA in its monthly Food Price Outlook.
The department lowered its estimate of grocery prices in 2017 to 1 percent, down from 1.5 percent. Pork prices are forecast to fall for the third year in a row and beef prices for the second straight year. In addition, fruits and vegetables and fats and oils would decline in price in the new year. Those products account for 30 percent of consumer spending on groceries, which the USDA calls “food at home.” Nearly 59 cents of the food dollar is spent on groceries.
The strong dollar and low petroleum prices have helped to hold food inflation to minimal levels. While grocery prices are 2.3-percent lower than they were a year ago, “food away from home” — meals at restaurants, fast-food outlets, schools and other institutions — continues to rise steadily.
“Restaurant prices primarily comprise labor and rental costs with only a small portion going toward food. For this reason, decreasing farm-level and wholesale food prices have had less of an impact on restaurant menu prices,” said USDA’s Economic Research Service.