EATING at home became more of a bargain in November as grocery prices softened and foodservice prices increased slightly, based on the latest Consumer Price Index (CPI) data released from the U.S. Department of Agriculture.
Although the previous year's drought and subsequent spike in agricultural commodity prices was expected to fuel a year-long hike in food prices, the most recent monthly data show that prices aren't any more expensive year over year than they might have been absent the yield-robbing weather event.
The CPI for all food in November was only 1.2% above the prior year's level, compared with expectations for a 3-4% increase.
Broken down into categories, however, the CPI for food consumed at home (grocery items, in other words) was up 0.6% year over year, and the November index actually fell 0.3% compared with October.
In fact, the food-at-home CPI has fallen throughout 2013 and is down 0.25% since January.
On the other hand, the CPI for food consumed away from home (restaurant purchases) in November was up 2.1% compared with last November, while the National Restaurant Assn.'s (NRA) Restaurant Performance Index (RPI) hit a five-month high in November (Figure).
According to NRA, the RPI has stayed above 100 for nine months running, indicating an expansion in the index of key industry indicators.
"Recent growth in the RPI was fueled, in large part, by improving same-store sales and customer traffic levels," Hudson Riehle, NRA senior vice president of research, said. "In addition, restaurant operators are somewhat more confident that sales levels will improve, and a majority plan to make a capital expenditure in the next six months."
Certainly, an improving economy has had some bearing on the improvement in restaurant spending.
Recent factory activity and job data suggest that the economy is on the precipice of stronger growth in 2014, and the overall improvement in the nation's economic situation in 2013 led the Federal Reserve to announce last month that it will ramp down its massive bond-buying program starting this month.
The Institute for Supply Management said last week its index of U.S. factory activity hit its highest level in more than two years, and its gauge of new orders is at a 3.5-year high.
NRA's Current Situation Index, which measures the current trends in four industry indicators — same-store sales, traffic, labor and capital expenditures — reached its highest level in six months as of November's reading. The increase in same-store traffic and higher sales may at least somewhat explain the uptick in the away-from-home CPI.
Looking ahead to 2014, the Economic Research Service (ERS) has forecasted that food price inflation will return to a range closer to the historical norm, based on moderate inflationary pressure and the outlook for commodity prices and trends.
After seeing essentially no change in food prices in 2012 and only a 1.5% increase in 2013, consumers should expect prices to increase 2.5-3.5% this year, according to USDA's latest forecast.
Digging into the November CPI data, ERS reported that pork prices fell 2.2% in November, turning around after several months of price increases.
Poultry prices, likewise, fell 1.9% after several months of solid gains.
Dairy prices, which had been flat for most of the year, increased 0.4% in November, led by a 1.0% uptick in fluid milk prices. ERS said this most likely reflected a slight contraction in the supply of dairy cows and likely marks the beginning of an upward trend in dairy prices this year.