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USDA Expects Low 2013 Inflation

WASHINGTON — The U.S. Department of Agriculture Economic Research Service’s August consumer price index (CPI) report forecast a low supermarket food inflation rate of 1.5% to 2.5% for 2013, and a slightly higher rate of 2.5% to 3.5% for 2014.

These rates are consistent with USDA’s July report forecast, when the agency dropped its 2013 inflation estimates.

“Most commodity prices other than those affected by the drought have seen moderate inflation or even deflation,” Richard Volpe, USDA research economist, told SN by email.


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“Fuel price inflation has been low, and the dollar has been strengthening, which has weakened imports for many foods. These are all factors that have contributed to our forecast revision.”

Overall food inflation that includes restaurant prices is expected to range between 1.5% to 2.5% for 2013, which is lower than the historical average of 2.8% for the past 20 years, according to USDA.

For example, the overall food inflation in 2012 was 2.6%, while the rate was 3.7% in 2011.

“In general, the impact of the 2012 drought on food prices has been smaller than expected,” Volpe said.

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 “For most of this year and last, the PPI [Producer Price Index] for finished and intermediate foods has grown faster than the food at home CPI, suggesting that margins have shrunk and that retailers have been slow to pass on higher commodity costs to consumers,” said Volpe.

Even though the USDA expects inflation for the rest of 2013 to increase at a faster rate than earlier in 2013, this annual rate is not expected to climb higher than 2.5%, according to Volpe. The expected increase in month-over-month inflation is contributing to the 2014 forecast, as well as the USDA leaving room for poor weather.

Compared to July 2012, eggs and produce have had the highest rates of interest so far this year, with egg inflation up 6.8%, fresh fruits up 2.5% and fresh vegetables up 3.6%.

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