Dive Brief:

• Food-at-home prices increased in December at an 11.8% annual clip, down slightly from the rate recorded the month before, according to Consumer Price Index data released Thursday by the U.S. Bureau of Labor Statistics (BLS).
• The food-at-home index rose 0.2% in December compared with November — the lowest month-to-month rate for that metric since March 2021.
• Overall inflation moved down last month to a 6.5% annual pace, continuing a decline that began last June, when the Consumer Price Index peaked at 9.1%.

Dive Insight:

Food-at-home prices closed out 2022 much the way they started the year: on the way up. But the latest figures from the BLS are a clear indication that the galloping inflation that has come to define the grocery industry during the past two years is poised to lessen as 2023 unfolds.

While still sharply elevated by historical standards, grocery inflation in December came in at the slowest annual rate seen since May 2022, when the figure rose to 11.9% en route to a 43-year high of 13.5% last August. Since hitting that inauspicious record, the pace of grocery inflation has steadily eased every month on a year-over-year basis.

Underscoring the unfolding trend toward slower inflation, prices for many goods sold in supermarkets declined in December compared with the previous month even as overall food inflation was up month-to-month for the 23rd month in a row, according to the BLS. 

Prices for dairy and related products fell 0.3% in December compared with November, while produce prices declined by 0.6% and prices for cereal and other bakery products were unchanged, the agency reported. Prices for meat, poultry, fish and eggs, however, were up 1% last month, reversing a decline in November as egg prices surged in light of the bird flu outbreak and strong demand by shoppers for the commodity.

Even as government statistics point toward moderating grocery inflation, the fact that food-at-home prices are well above their level a year ago poses a continuing issue for grocers as they communicate with shoppers tired of paying more at the supermarket.

Heightening that challenge is the fact that gasoline prices — which, like grocery prices, are a key measure of inflation for consumers — are lower now than they were in mid-2022 and were off significantly in December compared with November. In fact, the BLS said the 9.4% monthly decline in its gasoline index was the biggest factor in the 0.1% month-to-month decrease in overall inflation recorded in December. That decline was the first time across-the-board inflation has fallen from one month to the next since May 2020.

The average price of a gallon of regular gasoline was $3.27 as of Thursday, according to AAA. By comparison, the average price for the fuel hit a high of $5.02 per gallon on June 14, the organization reported.