Food Inflation Outlook - April

The April CPI FAH and PPI numbers were out this week.  Some of the pundits were expecting to see tariff impacts this month, but we are not seeing it in the data nor the forecast.  Overall, things are looking very positive for retailers.  Food inflation estimates are in the 2%-3% range for the next six months which are ideal because retailers can pass much of this along with minimal unit impacts.  As discussed in previous posts, once we begin to hit 4% inflation, units can take a hit.

As the model projected last month, CPI FAH did decline in April to 2.0% which is down from 2.4% last month.

I also pulled in the Import Price Index for Food, Feeds, and Beverages to see if the price of imported food is increasing which we would expect if tariffs were driving prices higher.  We can see an increase after the election but the trend has been down and we are about back to pre-election levels.  I also plugged this variable into the CPI FAH model to see if it helped to predict CPI FAH, but it did not.

The four charts below show the each of the CPI FAH model input variables.  Oil and Farm Product prices were down in April while PPI Grocery (Grocery Net Margin) was up.  Food Mfg prices were flat.  These charts also do not show any obvious Tariff impacts.

Below is the forecasted values versus the actuals.  We are seeing the forecast running above the actuals over the last three periods, but the error is small.

The chart below is each of the last three forecasts as well as the CPI FAH actuals.  The initial forecast, which is the blue line, was a scary line, particularly in the middle of the tariff madness, but the last two forecasts show we will likely peak this summer just below 3% and then food inflation should start to ease up in the Fall.  Chances of hitting the 4% threshold, which is when units start to decline, looks minimal.

Thus far the tariff talk has been more talk than actual movement in the data. We do expect some upward price pressure will be coming as inventories fall but few know when or by how much. With that said, the current trends bode well for retailers and I expect grocery sales to be up 2.5% to 3.5% in CY 2025 even if we hit some turbulence. This will be a significant increase over last years anemic 1.7% YOY growth.