FOOD INFLATION UP 1.8% IN FIRST HALF

WASHINGTON (FNS) -- Inflation in supermarket food prices during the first half of the year increased 1.8% against the first half of 1997, according to Bureau of Labor Statistics.he horizon indicating we'll have significant price changes for the next six months," said Annette Clauson, an agriculture economist with the U.S. Department of Agriculture.Clauson forecasts supermarket food prices to end the

WASHINGTON (FNS) -- Inflation in supermarket food prices during the first half of the year increased 1.8% against the first half of 1997, according to Bureau of Labor Statistics.

he horizon indicating we'll have significant price changes for the next six months," said Annette Clauson, an agriculture economist with the U.S. Department of Agriculture.

Clauson forecasts supermarket food prices to end the year 2% to 2.5% above 1997 levels, in line with the rate of inflation expected for all consumer goods. Last year, food prices increased 2.5% and in 1996 were up 3.7%.

During the 1980s, and through 1991, supermarket prices typically increased between 4% and 8%, which provided a cushion of cash-on-hand to help cover operating expenses, said Bob Lupo, a supermarket analyst with BancAmerica Robertson Stephens, Chicago. Absent this hedge, stores have become more efficient with inventory and employee scheduling, while boosting margins by expanding meals-to-go programs and private-label packaged food.

"They would welcome a moderate trend of inflation. The absence of inflation has also generated a more aggressive acquisition stance and expansion into new markets to build sales," Lupo said, forecasting the lack of inflation to play a continued role in the industry's ongoing consolidation.

Clauson said the overall lack of inflation in the economy is largely mirrored in supermarket food prices. Low inflation has kept processors' costs in check and processed food is a large component of the food price index tracked by the Bureau of Labor Statistics.

But the vagaries of nature affecting produce supplies, and changes in meat-production cycles and export demand also affect prices charged by retailers.

Beef prices have dipped from last year's 1.7% increase, due to a lot of meat on the market because of the industry's slaughter cycle and because of lessening demand for exports. Clauson forecasts beef prices to end 1998 unchanged against last year.

Likewise, there's a glut of poultry and pork on the market. Clauson estimates poultry prices this year will drop 1% and pork prices will fall 4.5%.