Don’t expect grocery prices to drop anytime soon | Economy

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Grocery prices are likely to remain high this year, Goldman Sachs economists say, continuing a Covid trend that has contributed to the high cost of living.

In a report to clients Monday evening, Goldman Sachs forecast that the home food category of the consumer price index will rise another 5-6% this year. The Wall Street bank cited a 6% rise in food prices so far this year and the “skyrocketing cost” of some agricultural inputs, including a five-fold increase in the price of some fertilizers.

“The stage has been set for further substantial increases in retail food prices this year,” Goldman Sachs economists wrote in the report.

Food prices in the consumer price index have already jumped 11% in the past two years, the fastest pace since the financial crisis, the bank said.

A perfect storm of bad weather, low crop yields, tight inventories and strong demand have driven food commodities up nearly 40% over the past two years, Goldman Sachs said.

Home food prices jumped 6.5% in December from a year earlier, according to the Bureau of Labor Statistics. This is the largest increase since December 2008 and has contributed to the highest headline inflation rate in 39 years. In December, there were significant price spikes in meat (14.8%), chicken (10.4%), eggs (11.1%) and other products.

Analysts have blamed the grocery price increases on supply chain turmoil, worker shortages, Covid and other issues. As CNN Business previously reported, Kraft Heinz recently said it would raise prices on dozens of products, ranging from Oscar Mayer deli meats to Velveeta cheese to Capri Sun drinks.

But there is uncertainty as to where the prices will go from here.

“We see risks in both directions,” acknowledged economists at Goldman Sachs.

The bank said price gains could be limited if demand declines due to an expected decline in food and nutrition benefits. On the other hand, grocery prices could rise because “companies could pass on a greater share of higher input costs when those increases are larger or longer lasting.”

The-CNN-Wire

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