There's some good news for grocery shoppers. December saw the smallest increase for the price of groceries since March of 2021 on a monthly basis, up 0.2%, according to the Bureau of Labor Statistics' (BLS) December Consumer Price Index (CPI). That's compared to an increase of 0.5% in November 2022 month-over-month.
Food prices overall rose 10.4% year-over-year in December, with grocery prices up 11.8%, only slightly lower than November's CPI data of a 12.0% increase.
"I think this is clear evidence of deceleration," BLS Economist Steve Reed told Yahoo Finance. "There's continued evidence of deceleration in food price increases ... to the point where many of them are getting flat. We're starting to see some declines" he said. "This makes sense in the light of transportation costs ... lower gasoline prices trending down," he added.
Compared to November 2022, gas dropped 9.4%, while fuel oil dropped 16.6%. Year-over-year fuel oil is up 41.5% though, while gasoline is seeing a drop of 1.5%. Reed called the drop in gasoline "a strong downward trend."
Items that saw a decline month-over-month include dairy and related products (down 0.3%), with milk bringing the category down further (down 1.0%); flour and prepared flour mixes (down 1.0%; bacon and related products (down 2.9%); instant coffee (down 2.2%); ice cream and related products (down 1.1%), and fresh fruits (down 1.9%).
Food price jumps on a monthly basis: eggs (up 11.1%), which was far higher than November's 2.3% month-over-month jump due the Avian Flu outbreak that decreased the egg laying flock in the U.S., frankfurters (up 3.9%), fresh sweetrolls, coffeecakes, doughnuts (up 2.6%), lettuce (up 4.0%), tomatoes (up 3.4%) and butter (up 3.3%).
Blame it on eggs
If you take eggs out of equation though, the rate of inflation for groceries would be virtually flat, Reed said.
"If you sort of removed eggs. If you took eggs out of 'food at home,' it would have been virtually flat. Eggs were over 90% of that increase [for month-over-month]," he said. "Obviously there's a mix of increases and declines, but basically, without eggs, we would have had food prices getting flat for the month.
Year-over-year some items have seen massive inflation, including eggs (up 59.9%), lettuce (up 24.9%), breakfast cereal (up 23.4%), butter (up 43.8%) and bakery products (up 16.3%).
It may be a while until we see prices fall further, said Arun Sundaram, CFRA Senior equity analyst.
"We’re seeing some packaged food manufacturers still increasing prices in 2023, but this latest round of price increases is much smaller and more targeted than prior waves. In terms of relief, the good news is cost pressures are easing, so while we probably won’t see major prices increases in 2023, it could be a while until we see prices actually fall year-over-year. Most food manufacturers enter into forward contracts or hedges for raw material needs, so it can take a year or so until they actually benefit from lower input costs," he told Yahoo Finance.
Investors seemed pleased by the overall report on Thursday in the pre-market, with all major indices in the green.
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
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