Food prices continue soaring despite inflation falling

Inflation finally cooled off in July, but food prices went in the opposite direction — hitting their highest rate of growth in some 43 years.

Why it matters: You might be able to escape price increases in discretionary items — but everyone has to eat. Plus, food price inflation hits low-income people the hardest as food eats a greater percentage of their budgets.

By the numbers: Food prices rose 10.9% in July, compared with a year earlier, and 1.1% from June.

• That came despite rosier news on overall inflation, which dropped to 8.5% annually — with prices essentially flat from June to July.

Context: In the five years before the pandemic, the annual rate of food inflation was never more than 2.1%, according to Bank of America analysts.

Between the lines: The 12-month rate of price increases included a 38% jump for eggs, 26.4% for butter and margarine, 15.6% for milk and 13.7% for bread.

The intrigue: The growth in prices of groceries continues to outpace that of food prepared outside the home — 13.1% vs. 7.6%.

• "The surge in food at home prices has been unusually broad based, with cereal and dairy prices leading the way in July," Capital Economics chief U.S. economist Paul Ashworth wrote Wednesday.

The big picture: For many people, stubborn inflation in the food category is blunting the tangible effect of what was an overall positive CPI reading today, led by a fall in gas prices.

💭 Our thought bubble: Groceries and gasoline are particularly salient in how people experience inflation, because they're absolutely-gotta-have-it goods for which people have little choice but to pay up, Axios Macro co-author Neil Irwin writes.

• What the fall in gas prices is giving Americans, higher prices for all sorts of food is in part taking away.

What they're saying: "Main Street fears that high food, rent and other day-to-day prices will persist in hitting their wallets and limiting discretionary spending," AXS Investments CEO Greg Bassuk wrote Wednesday.

What we're watching: Relief may be on the horizon, however.

• "In recent weeks there has been a collapse in not just agricultural crop prices, but dairy, egg and chicken futures prices too," Ashworth wrote.
• That could spell good news for grocery prices by the fall season, he said.