Food Store Sales Growth Aligns With Inflation In 3rd Quarter

The U.S. government release of a bevy of economic reports last week that gave our fiends at The Food Institute gives us a chance to assess 2011 through its first three quarters via a bit broader perspective than looking at data on a month-to-month basis.

The U.S. government release of a bevy of economic reports last week that gave our fiends at The Food Institute gives us a chance to assess 2011 through its first three quarters via a bit broader perspective than looking at data on a month-to-month basis. 

The accompanying graph combines those retail sales and consumer price reports and portrays what has happened since the last bout of food price inflation occurred in 2008 – the year retail food prices jumped 6.1% on an annualized basis, topping 7% at times.  

A subsequent drop in prices was not unexpected although the depth of that decline was greater than many anticipated – dipping into deflationary territory in the second half of 2009. Since that time, retail food prices have been steadily increasing, up 5.9% in third quarter of this year.  Wholesale food prices during the quarter, meanwhile, were up 7.9% from 2011 indicating that retailers are still absorbing some of the increases they have incurred.

Sales at food stores and eating & drinking places prior to the second half of 2008 had not even been able to keep pace with those rising prices, but reversed at that time as food prices continued to decline. Since then, at least on a quarter-by-quarter basis, sales at grocery stores and foodservice outlets were safely outpacing retail food price advances – until the latest quarter when sales growth from a year earlier slowed a bit but retail food inflation did not. 

Will history report itself as we move into 2012?  While food prices in 2012 are projected to increase a bit from current levels, economists at USDA do not project gains as large as in 2008 or even the current year, seeing more of a return to moderate levels of food price inflation of between 2% to 3% for retail food prices. We will however have to wait and see whether that is how that projection holds as the final quarter of 2011 unfolds.

For more on food prices, retail sales, and other economic news, be sure to turn to The Food Institute at www.foodinstitute.com.