Food costs rose in March by the most in 10 months, indicating mounting grocery store bills for Americans in the coming months even as gasoline prices cool.
The producer price index report on Wednesday showed food costs climbed 2.4% from a month earlier, the largest increase since May. The jump was driven by bigger increases in prices for grains, vegetables, cooking oils and pork — suggesting the closely watched consumer price index will soon reflect such advances.
From a year earlier, food prices advanced an eye-popping 16.2%, the largest increase in annual records back to 2010, the PPI data showed.
“A number of the commodity-based food categories in the CPI tend to track their PPI counterparts with a lag of a month or two, so we are likely to see ongoing big increases for food prices at the consumer level,” Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, said in a note.
Economists and policymakers, including those at the White House, have been mostly concerned about the impact of rising energy prices on U.S. consumers. While gasoline prices have been easing over the last two weeks, the PPI report suggests that food may become the larger burden on households.
Consumer prices for food — which increased in March at one of the fastest rates since 1990 — have already been rising solidly for months, partly a reflection of transportation bottlenecks and other supply chain constraints resulting from the pandemic. The Russia-Ukraine war has further driven up futures prices on concerns about the supply of grains and fertilizer.
No relief from higher costs appears to be coming soon, according to Curt Covington, senior director of institutional credit at AgAmerica, an agricultural lending firm.
“The short supply across a lot of commodity sectors in agriculture, whether it be the meat or grain sector” is behind the price increases, Covington said, an issue that’s expected to persist for the foreseeable future.
That’s especially bad news for lower-income households that spend more of their earnings on necessities. Those in the lowest-income quintile spend 18% of their income on food and energy, compared with 11% in the highest one-fifth group, according to Bloomberg Economics.
“The knock-on effects of the Russia-Ukraine conflict, and potentially China’s lockdowns, have not fully flowed through the supply chain in March, and will add to the momentum in inflation that’s built up over the last two years,” Bill Adams, chief economist at Comerica Bank, said in a note.