Consumers are spending less at the gas pump to start 2019, but some of those savings will be spent on food purchases in the coming months.
The U.S. Department of Agriculture (USDA) reported this week that inflationary food prices will be 1% to 2% higher than a year ago, nearly double the uptick seen last year.
Categories such as dairy are poised to see some of the biggest price increases pegged between 3% and 4% higher than a year ago. That comes on the heels of flat to slightly lower dairy prices in 2018. Egg prices are expected to increase 1% this year, adding to the 10% price hike taken in 2018. The USDA expects egg prices will remain higher through Easter.
Fresh produce is popular with consumers who are looking to eat more whole and less processed fruits and vegetables. The USDA expects fresh vegetables will cost between 2.5% and 3.5% more in 2019 and fruit lovers will pay up to 3% more than a year ago.
Cereals and bakery products are forecast to rise 2% to 3% and beef prices are also expected to be 2% more expensive than last year. Chicken prices are predicted to rise by 2% as well, while fish and seafood costs are up 1.25% year-over-year.
As the demand for certain foods wains and supply builds up, consumers are expected to see lower retail prices for items like fats and oil, processed fruits and vegetables and non-alcoholic beverages, according to the report.
USDA expects food-away-from-home prices — food purchased at restaurants — to grow at a consistent rate this year, rising 2% to 3%, on par with a year ago.
Modest inflationary prices in food are typically good for retailers like Walmart, who can better manage the margins and find price separation against smaller competitors, while also driving higher sales revenue for investors.