Prediction for Food Inflation Remains Low

The USDA's August prediction that that the consumer-price index for food will rise between 0.5 percent and 1.5 percent this year, the smallest increase since 1992, remains the same, according to a forecast released yesterday.  Food prices for 2011 are expected to be higher, rising at a rate of 2 percent to 3 percent, according to the Wall Street Journal.

"Forecasting the food inflation rate is unusually difficult this year.  Agricultural commodity prices are booming even though the U.S. economy is weak.  Many executives in the food manufacturing and supermarket sectors are nervous about passing along all of their higher ingredient costs to consumers who seem willing to shop around for bargains."

Most commodity prices are high this year and "U.S. farm exports are surging amid strong demand from emerging economies such as China, which are recovering from the global recession far faster than the developed world."

In addition, the high unemployment rate is helping to keep prices low this year -- "shoppers are more sensitive to prices" and labor costs are low.

To read the Wall Street Journal story, click here.

Posted: 10/26/2010