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Food prices are expected to rise next year--but at a slower rate than in 2023, a new report shows.
Food prices in 2024 are forecast to increase at 2.9 percent--nearly half of the 5.8 percent price increases seen in 2023, according to the U.S. Department of Agriculture. Meanwhile, how much Americans will have to pay for groceries next year will also see a slowdown with an estimated rise of 1.6 percent in prices compared to the 5.2 percent jump seen in 2023.
The news comes as Americans struggle with the higher food, housing and other living expenses. Bloomberg reported this week that sticker shock, the phrase to describe one's surprise over the price of an item, remains prevalent. Bloomberg found it now costs about $19.27 more to buy the same goods as before the pandemic.
Kroger, one of America's largest supermarkets, suggested it was going to have to adjust to a more cautious consumer and what it called food disinflation adding to the anticipated sense that food prices are set to slow, on its earnings call Thursday.
"Most of the data that we're seeing would tend to point towards more of a typical year next year for food-at-home with food-at-home inflation being in the low single-digit range," Gary Millerchip, the company's chief financial officer, told investors, using food-at-home referring to groceries.
Overall Inflation Declines
The slowing of food prices tracks with the overall decline in inflation which in October hit 3.2 percent, down from when prices were at 40-year highs in June of 2022 when inflation hit 9 percent.
The skyrocketing of prices prompted what analysts say is the most aggressive series of rate hikes by the Federal Reserve to slow down inflation to its current 5.25 to 5.5 percent. Those moves have helped to bring down inflation and but, in the process, pushed up borrowing costs for homes, cars and business investment. Inflation is still yet to get to the central bank's target of 2 percent leaving open the question when the Fed might begin to cut rates.
On Thursday, the Fed's preferred gauge of inflation, the personal consumption expenditures price index increased by 3 percent in October, from the same time last year, its weakest pace since March 2021 pointed out KPMG's chief economist Diane Swonk. In September, it hit 3.4 percent.
Meanwhile the core, which excludes the volatile price fluctuations of food and energy prices, also slowed rising by 3.5 percent in October from a year ago, compared to 3.7 percent.
"The pace of inflation is still above the Fed's 2 percent annual target, but today's data suggest it is beginning to get inflation under control," Swonk said in a note.
Rates Hikes Could Be Over
A more sustained signal of slowing inflation is needed, but Swonk suggested rate hikes may be over.
"The worst in rate hikes are likely behind us; the next move will be to cut," she added.
The Fed kept rates at their current level at their last two meetings and could so again at their forthcoming gathering in December.
The environment of high interest rates has come at a cost for Americans who dream of owning a home. Mortgage rates have soared upwards of 7 percent making buying a house beyond the reach of a huge swathes of Americans.
The slowing of food prices could be a signal that soaring prices may indeed be under control and may lead to the cutting of rates that could in turn help bring about a fall in mortgage rates.
One Fed official suggested that policymakers have made progress on slowing down inflation.
"I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent," Fed governor Christopher Waller said earlier this week.
But illustrating the uncertainty that has gripped policymakers, another Fed governor indicated that they'd be willing to hike rates if inflation remains high.
"I continue to see an unusually high level of uncertainty as I consider current economic conditions and my own views on the outlook for the economy and monetary policy," Fed governor Michelle Bowman said Tuesday. "I remain willing to support raising the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or is insufficient to bring inflation down to 2 percent in a timely way."
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About the writer
Omar Mohammed is a Newsweek reporter based in the Greater Boston area. His focus is reporting on the Economy and ... Read more