Dive Brief:

• Food-at-home prices rose in January at an 11.3% annual rate, down from 11.8% the month before and the lowest rate of increase by that measure since last April, according to Consumer Price Index data released Tuesday by the U.S. Bureau of Labor Statistics. By comparison, food-away-from-home prices were up 8.2% for the period.
• The food-at-home index was up 0.4% in January compared with December 2022, up from the monthly increase of 0.2% recorded last month. The food-away-from home index was up 0.6% in January compared to 0.4% in December.
• Overall inflation edged down in January to a yearly pace of 6.4%, building a string of declines that started after the metric hit a high of 9.1% last June.

Dive Insight:

While grocery prices again moved ahead forcefully last month, the latest data from the BLS indicate that the slow but steady deceleration that has come to define the agency's food-at-home index since mid-2022 year-over-year continued as 2023 began. Restaurant menu prices have also slowly declined, with January marking the third sequential month of deceleration after price increases peaked at 8.6% in October, according to the National Restaurant Association. 

Full-service menu prices were up 8.1% and limited-service was up 6.7% in January compared with 12 months ago, in line with recent pricing changes across several chains. McDonald’s average pricing was up 10% for the full-year of 2022 in the U.S., while Chipotle is up in the 9% to 10% range compared to a year ago. Pricing could go down further as chains like Starbucks expect pricing to normalize as inflation softens. 

In January 2022, food-at-home prices recorded an annual increase of 7.4% during a month that saw overall inflation reach 7.5%, which was at the time the fastest pace in 40 years. But those figures seem tame when compared with the corresponding figures for last August, when food-at-home inflation peaked at 13.5% and the across-the-board Consumer Price Index came in at 8.3%.

Since that point, however, both metrics have continued to come down — although the overall rate of inflation for January was higher than anticipated and also rose month-to-month more rapidly than it did in December. That suggests that the Federal Reserve’s efforts to blunt price increases through multiple interest rate hikes have still not had their full intended effect.

Gasoline prices, which like the cost of groceries is a key way consumers evaluate their spending power, were up month-to-month in January after falling in December, the BLS said. The index commodity rose 2.4% last month after falling 9.4% in December.

According to AAA, the price of a gallon of regular gasoline in the United States was $3.14 on average as of Tuesday. A month earlier, the price averaged $3.29, AAA said.