Consumers pulling back on groceries as input cost for food continues to drive up prices

Some retailers and food manufacturers are responding by offering more discounts and promotions – a strategy that could generate foot traffic and boost unit sales but also squeeze margins as wholesale prices for key commodities continue to rise – albeit less than this summer and slower than expected, according to financial data released this week by the Labor Department.

Industry stakeholders looking for relief are calling on the federal government to help ease supply chain volatility, which plays an outsized role in the extent of inflation and where it hits.

Inflation may be cooling, but historic highs still threaten economic growth

On the whole, economic indicators released earlier this week suggest inflation may be cooling, but wholesale prices remain at historic highs and consumers, while still spending, are reassessing where to allocate funds.

In October, the Producer Price Index​, which measures the cost companies pay for finished goods, rose 0.2% from September – half the expected 0.4% increase expected by Dow Jones – continuing a downward trend in the year-over-year percent change of selected PPI final demand price indexes that began in June.

And while the deceleration is giving some economists hope that inflation has plateaued, this is cold comfort to some who are still grappling an 8% year-over-year increase in the PPI.

Within food, the PPI is even higher – up 10.4% year-over-year and 25.9% above pre-pandemic levels reported in February 2020, notes the Consumer Brands Association.

According to the PPI, the prices for key food commodities continue to climb – in some cases triple digits and in many double digits. For example, the price of eggs is up 158% year-over-year, while grain is up 29%, pasta 37%, dairy products 18% and turkeys a staggering 40% just when many Americans are looking to buy them as the centerpiece for their upcoming Thanksgiving meals.

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