A steeper decline in food prices in May is good news for consumers, bad news for grocery retailers, and a key reason why overall inflation pressures remain weak.
The food price falloff is helping households offset higher prices elsewhere, including a significant jump in apparel prices in May. At the same time, food prices are a drag on grocery and mass retailers, as is evident in the latest retail sales trends found here.
The extremes in inflation pressure create challenges for households, but are not evident in the topline inflation numbers—which remain modest overall:
Inflation excluding food and fuel—the so-called core inflation rate—edged higher to 2.2% in May, which matches the year-to-date rate. Overall inflation including food and fuel remains much lower, near 1%, because energy prices remain down from a year ago.- In food at home, the price declines are evident across a range of products from meats and fresh produce to packaged goods. Food prices are down month-to-month, year-to-year, and year-to-date.
- In apparel, prices were up sharply month-to-month (+0.8%) across most apparel categories except footwear. Otherwise, apparel prices remain flat on a year-to-date basis.
- Price pressures otherwise remain focused in services, led by rent, medical care and education.
- Energy prices are starting to edge higher on a month-to-month basis, although they remain down by about 10% from a year ago.
See the table summary for more detail.
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