When a package of grapes costs $10 or a gallon of milk costs over $5, consumers have little recourse. If they want food on the table and drinks in the fridge, shoppers have to pay up at the register and hope that slowing inflation will bring grocery prices down.
Those shoppers may want to think again.
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That after a new study showed that while inflation is finally waning, food prices remain high, with an 18% growth rate during the past years, according to a study released on June 14 by Canada-based RBC.
Consumers are responding to rising food prices by cutting back on groceries and global supply chain problems. While adverse events impacting prices are slowing down, they still lead to inventory problems for grocery retailers as supply tangles raise the cost of buying raw food commodities.
Yet RBC isn’t buying the argument that improved conditions on all food and drink fronts will lead to sinking grocery prices.
“These factors will put the brakes on the rapid rise in food prices, but they won’t reverse it,” the RBC reported. “Bottom line - food prices won’t rise as rapidly as they did over the last year. But ongoing challenges like extreme weather events and labor shortages suggest a decline from currently elevated levels is unlikely.”
The “stickiness” issue related to high inflation and balky supply chains should be around for another year or so, BRC reports, and that’s enough to keep grocery prices from declining significantly. Then there’s the lingering pandemic hangover issue that has seen consumers effectively paying more for less food over the past three years.
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While rising food and drink prices will eventually lose steam, that won’t be enough to curb high grocery costs. Not when issues like extreme weather events continue to limit farm production, which in turn crimps inventory supplies. Furthermore, an aging population will likely leave grocery retailers short-staffed going forward and lead to higher wage growth.
That’s bad news for foodstuff consumers, who haven’t gotten many breaks lately and likely won’t catch a break on food prices anytime soon.
“All told, while we continue to expect lower food inflation in the current economic cycle, we don’t expect food prices to return to pre-pandemic levels,” RBC concluded.
