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Though the overall July Consumer Price Index didn't rise from the previous month, the food-at-home index showed a higher month-to-month increase and posted the biggest 12-month gain since the period through March 1979.

July price inflation eases, but not for grocery

Food-at-home CPI up 13.1% year over year, 1.1% since June

The July Consumer Price Index (CPI) came in flat from the previous month, but inflation — up again for food — remains high historically, according to the U.S. Bureau of Labor Statistics (BLS).

The CPI for All Urban Consumers didn’t rise on a seasonally adjusted basis month to month, following gains of 1.3% in June,  of 1% in May, 0.3% in April, 1.2% in March, 0.8% in February and 0.6% in January, BLS reported Wednesday. Year over year, inflation was up 8.5% (unadjusted), down from 12-month increases of 9.1% for June, 8.6% for May, 8.3% for April, 8.5% for March, 7.9% for February and 7.5% for January.

BLS said the food CPI, including food-at-home and food-away-from-home, edged up 1.1% month over month in July and marked the seventh consecutive monthly gain of 0.9% or more, including 1% in June, 1.2% in May, 0.9% in April, 1% in March, 1% in February, and 0.9% in January. On a 12-month basis, the food CPI rose 10.9%, topping the 10.4% increase in June and well above year-over-year upticks of 10.1% in May, 9.4% in April, 8.8% in March, 7.9% in February and 7% in January.

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July’s food-at-home index surged by 13.1% year over year, vaulting the 12.2% increase in June and representing the biggest 12-month gain since the period through March 1979, according to BLS. That food-at-home CPI has climbed steadily on an annual basis since the start of the year, rising 11.9% for May, 10.8% for April, 10% for March, 8.6% for February and 7.4% for January.

The month-to-month rise in the food-at-home index remained steep in 2022, up 1.1% in July after gains of 1% in June, 1.4% in May, 0.9% in April, 1.5% in March, 1.4% in February and 1% in January. The latter increase came after only a 0.4% uptick in December.

All six major grocery store food group indices rose in July, BLS reported. The index for nonalcoholic beverages saw the largest monthly increase at 2.3% (including 3.5% for coffee); followed by other food at home (+1.8%); cereals and bakery products (+1.8%); dairy and related products (+1.7%); meats, poultry, fish and eggs (+0.5%); and fruit and vegetables (+0.5%). The trend was similar on a year-over-year basis. The sharpest 12-month increases came from other food at home (+15.8%) and cereals and bakery products (+15%), while the remaining major grocery store food groups had gains ranging from 9.3% (fruit and vegetables) to 14.9% (dairy and related products).

Meanwhile, the July index for food-away-from-home rose by 0.7% month to month and by 7.6% year over year, dipping from respective monthly and 12-month increases of 0.9% and 7.7% in June.

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Excluding food and energy, the July CPI rose 5.9% from a year ago and 0.3% from a month ago, a slight ease-up from upticks of 5.9% year over year and 0.7% month to month in June, according to BLS.

Energy costs, the chief factor in this year’s CPI escalation, relaxed a bit in July, up 32.9% year over year but down 4.6% month over month, compared with respective increases of 41.6% and 7.5% in June. Gas and fuel oil prices were up 44% and 75.6% for the 12 months through July versus hikes of 59.9% and 98.5%, respectively, in June. Month over month, prices fell 7.7% for gas and 11% for fuel oil in July.

“Consumers are responding to rising prices by shopping promotions, prioritizing value options, and trading down to avoid going without,” according to Krishnakumar (KK) Davey, president of thought leadership for CPG and retail at consumer goods market researcher IRI.

Indeed, IRI’s latest findings show that consumers are shifting away from national brands in categories where store brands are already well-known or in commodity categories. For example, in the four weeks ended July 24, private-label share grew the most in fresh eggs (+6 percentage points), sugar (+5 pp), sour cream (+4 pp), shortening and oil (+3 pp), butter/butter blends (+3 pp), flour (+2 pp), frozen meat (+2 pp) and bottled water (+4 pp).

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Consumers, too, are buying greater-value meal solutions, such as pasta (+6 percentage points), rice (+5 pp), frozen potatoes (+6 pp) and canned soup (+3 pp), according to year-over-year IRI data for the 13 weeks ended July 10. Meanwhile, shoppers are purchasing less of higher-priced categories, such as sports drinks (-9 pp), ready-to-drink coffee/tea (-3 pp), frozen novelties (-6 pp), refrigerated entrées (-8 pp) and frozen dinners/entrées (-5 pp).

“We are advising our manufacturer clients to deploy all levers of strategic revenue management, prioritize strong in-market execution and invest in retailer partnerships to ensure that the right products are available in the right places at the right times,” Krishnakumar added. “Additionally, retailers must have the tools to quickly adjust to changes in consumer preferences to ensure they are offering the right assortment at price points that appeal to price-sensitive shoppers as well as their most valuable customers.”

In the e-commerce arena, Adobe Analytics reported a dip in online retail prices. For July, the Adobe Digital Price Index showed online prices down 1% year over year after upticks of 0.3% in June and 2% in May — marking the first month of deflation for e-commerce after 25 consecutive months of inflation. Online pricing fell 2% month over month in July, with 14 of the 18 product categories tracked by the Adobe DPI seeing price decreases. Grocery, however, posted online price hikes of 1.44% month to month and 13.4% year over year in July.

“Wavering consumer confidence and a pullback in spending, coupled with oversupply for some retailers, is driving prices down in major online categories like electronics and apparel,” explained Patrick Brown, vice president of growth marketing and insights at Adobe. “It provides a bit of relief for consumers, as the cost of food continues to rise both online and in stores.”

Online remained the grocery retail channel most impacted by inflation in July, according to consumer market data specialist Numerator. Online grocery prices were up 25.7% year over year for the four weeks through July 31, with dollar stores second at an inflation rate of 22.4% over that period. Online and dollar were followed by mass merchants (15.4%), supermarkets (13.6%) and warehouse clubs (9.3%) in grocery inflation rates for July.

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