Price Inflation Slowed for First Time This Year

However, costs for food and beverages remain elevated.

October 13, 2022

CHICAGO—Food and beverage prices last month increased by 1.0% compared to August, according to a new report by IRI. The latest data show that while food and beverage prices remain significantly elevated—about 13.3% higher year-over-year through the five weeks ended October 2—overall year-over-year inflation was steady from August to September, showing a moderating trend after months of steady increases.

The moderating effect is being driven by year-over-year price deflation in store perimeter categories, such as produce and deli, whereas prices in center-store categories, including snacks and frozen meals, continue to rise.

"September data revealed some welcome news for consumers: Price inflation is slowing down for the first time this year in the perimeter categories that account for nearly $200 billion in annual retail sales," said Krishnakumar (KK) Davey, president of Thought Leadership for CPG and Retail, IRI and NPD. "However, overall grocery bills are still significantly higher than this time last year, causing shoppers to shift their purchase habits.”

Key insights from the September 2022 report include: 

  • September inflation inched up. At-home food and beverage inflation for September 2022 increased 1.0% compared to August.
  • Overall year-over-year price inflation is plateauing. Overall food and beverage pricing remained just over 13% higher in September compared to the year-ago period, in line with August and just slightly above July year-ago-levels. The flattening of this curve is a welcome change following the consistent, significant, year-over-year price increases the U.S. has experienced every month from January to July 2022.
  • Perimeter categories offer some relief. Prices in perimeter categories were 9.6% higher in September compared to the year-ago period; however, year-over-year inflation in these categories has declined every month since February.
  • Inflation varies significantly across the store. For the five weeks ended Oct. 2, 2022, prices in the alcohol segment were up 4.2% compared to the year-ago period, while dairy (up 19.6%) and frozen meals and other frozen foods (up 18.4%) were sharply higher.

IRI also found that consumers are using these various strategies to cope:

  • Volume data shows many consumers are forgoing purchases in categories that have seen significant price increases. For example, sales volumes in the deli service lunchmeat, fresh fish, frozen dinners and shelf-stable dinners categories each declined over 10% in September.
  • Quick trips continue to grow the fastest of all trip types over the past 12 weeks, up 5.7% compared to the year-ago period. Quick-trip behavior signals that consumers are “cherry picking” purchases of items at different stores to take advantage of the best deals.
  • Consumers are buying larger pack sizes to get better value on a per-unit or volume basis.
  • To help balance affordability for consumers and rising input costs, food manufacturers are leveraging creative price-pack architecture to keep unit costs lower. Brands across the shampoo, ice cream, dog food and peanut butter categories have been experimenting with “shrinkflation,” developing smaller pack sizes to keep unit costs steadier even as input costs rise.

Inflation last month rose 8.3% over August 2021 but slowed slightly compared to 8.5% in July and 9.1% in June. However, when looking at the core consumer-price index, which excludes energy and food prices, inflation was up 6.3% year over year, and up sharply from 5.9% in both July and June. Month over month, the core Consumer Price Index rose 0.6% in August, which was double July’s pace. Core inflation is closely watched by investors and policymakers because it can replace broad, underlying inflation and predict future inflation.

“Consumers are getting relief at the pump, and there should be further relief coming at the gasoline station and the grocery store, since one of the biggest costs of food is transporting it,” Ryan Sweet, senior director of economic research at Moody’s Analytics, told the Wall Street Journal. “But in the last few months, price increases have broadened out.”