Recession May Have Ended But Tough Times Continue For Food Retailers

While the recession may have technically ended in the second quarter of last year, its lingering effects were still apparent among food retailers in the second quarter of 2010.

While the recession may have technically ended in the second quarter of last year, its lingering effects were still apparent among food retailers in the second quarter of 2010. And for the first time in recent history, GDP growth actually exceeded sales gains at retail food stores, according to an analysis by the Food Institute. The GDP in the second quarter advanced 3% above the same quarter a year prior, while food store sales rose just 1.5%, according at data from the Bureau of Economic Recovery and the Census Bureau, respectively.

The second quarter marked a turnaround; food stores slipped, and the GDP rose. And although the third quarter data for food store sales will not be available for another three weeks, The Food Institute reports that during the first two months of the third quarter, food store sales were running only about 1.3% higher than a year earler – still under that 3% growth in the GDP.

Noted Frank DiPasquale, executive vice president of The National Grocers Association, and Food Institute trustee, “The recession may have ended from a technical perspective…..but we are still living with a recession type marketplace…more people on public assistance…deflationary pricing like we have not seen in 51 years…grocers margins are tight…sales are flat at best…and an uncertain regulatory environment…and of course a jobless recovery…”

A number of factors are contributing to the lag in recovery for food retailers, not the least of which is the lack of inflation in retail food prices. As noted by The Food Institute, retail food prices through the first eight months of 2010 were running three-tenths of a percent under a year ago. Overall retail prices as reflected by the Consumer Price Index, meanwhile, were up 1.8%.

Wholesale food prices continue to advance at a much greater rate, however, and August marked the 11th straight month wholesale food price advances exceeded those at retail.  “Food retailers deserve some credit,” noted Brian Todd, President of The Food Institute, “ for keeping retail food prices in check in these tough times for consumers.”

The Food Institute will continue to follow these economic developments in its weekly Food Institute Report as it has since 1928, daily inToday In Food, and on its website. To learn more, go to www.foodinstitute.com.