The high food inflation rate this year will bleed into 2023, said the Agriculture Department on Tuesday, raising its forecast for the new year to 3.5 percent. It was the first adjustment since USDA economists began inflation forecasts for 2023 in July.
“Food prices are expected to grow more slowly in 2023 than in 2022 but still at above historical average rates,” said the USDA’s monthly Food Price Outlook. The 20-year average is an increase of 2.4 percent annually.
Food prices will rise by an average 10 percent this year compared to last year, said the USDA, an increase of 0.5 points from its previous estimate. It would be the highest food inflation rate since 11 percent in 1979.
The food inflation rate of 8.2 percent was higher than the overall inflation rate for the U.S. economy, according to the latest Consumer Price Index report. Inflation has become deeper-rooted and more widespread in the U.S. economy this year and was outliving expectations it would be a transitory part of recovery from the pandemic. The economy is the leading issue for voters in the upcoming mid-term elections, according to polls.
Still, forecasters say inflation will abate in 2023. “Price growth will slow as the economy slows next year,” said the Kiplinger Economic Report. It said the year would end with inflation at 8 percent but dropping to 3.5 percent by the end of 2023.
Prices for poultry, eggs, dairy, fats and oils, processed fruits and vegetables, cereals and bakery products, sugar and sweets, nonalcoholic beverages, and “other foods” will climb in the new year, following hefty increases this year, said the USDA. Poultry, for example, was forecast to rise by 4.5 percent after a 15 percent increase this year. Cereals and bakery products were forecast to climb by 13.5 percent this year and by 5.5 percent in 2023.
The initial USDA forecast for food inflation in 2023 was 3 percent. In the new forecast, the Economic Research Service pegged the all-food inflation rate at 3.5 percent, grocery inflation at 3 percent and food-away-from home at 4.5 percent in 2023. For this year, the forecast was an all-food rate of 10 percent, groceries at 11.5 percent and food-away-from home at 7.5. percent.
Miguel Patricio, chief executive of Kraft Heinz, said during a CNN interview he expected inflation and supply chain disruptions would continue into 2023. “We’ve already increased the prices that we were expecting to increase this year but I’m predicting that next year, inflation will continue and as a consequence, (we) will have other rounds of prices increases,” he said on Monday. The company was scheduled to release its quarterly earnings report on Wednesday.