Dive Brief:

• Prices for food purchased for consumption at home in August were 4.6% higher on an unadjusted, year-over-basis than they were a year earlier, the U.S. Bureau of Labor Statistics reported Friday.
• By comparison, the overall Consumer Price Index, which measures the average change in prices paid by urban consumers for a basket of common goods and services, rose 1.3% over the same period, the agency said.
• Figures from the government suggest grocery prices have moderated during the past few months as supply chains have regained equilibrium and shoppers have retreated from the frantic buying patterns that marked the early weeks of the pandemic. On a seasonally adjusted monthly basis, prices fell about 1% in both July and August, according to the Bureau of Labor Statistics.

Dive Insight:

Food costs for consumers have gone up due to increases in the prices of meat, poultry, fish and eggs, which collectively rose 7.1% during the past year but fell in August by 1.7%, according to the Bureau of Labor Statistics.

The upward pressure on grocery prices this year can also be attributed to a reduction in retail promotions, according to data provided by Nielsen from a study the market research firm conducted for retailers and manufacturers. 

​On average, shoppers received promotions on 26.2% of items they purchased in August, down more than 5% from the 31.4% level recorded during the same period in 2019, according to Nielsen. The proportion of grocery items sold with promotions declined 10% in August compared with that month last year, while the share of household care items with promotions fell 12%.

Retailers pulled back on promotions amid sky-high demand during the early stages of the pandemic, but have begun reintroducing them as shopping habits have normalized. Nielsen reported promotional activity has increased in the meat department recently, but that "this has done little to offset the total basket expenditure and ease the cost for shoppers and their grocery bills."

The grocery sector was among the few bright spots in the economy as the public health crisis clamped down on the nation. Industry sales rocketed ahead almost 27% in March compared with the month before, helping them record a year-over-year gain of more than 29%. Taken as a whole, retail sales plunged nearly 9% that month in comparison with the level seen in February.

Grocers have seen their fortunes soar as a result of consumers’ elevated grocery spending. Chains including Kroger, Albertsons and Ahold Delhaize have all reported strong sales gains this year, with sizzling profits to match.

On Friday, Kroger said sales during the second quarter that concluded in mid-August were up 8% year over year, driving a 47% increase in operating profits. Although the figures were not as stellar as they were in the first quarter, they beat Wall Street's forecast and Kroger said signs point to continued strong results through the end of the year and into 2021.