Alert – Experts say grocery prices are no longer fueling inflation… but another essential is

Since March 2021, Americans have felt pain at the grocery store. 

A perfect storm of supply chain disruptions, global conflicts, rising gas prices, and higher wages sent food prices soaring. By the summer of 2022, supermarket inflation hit 9.9 percent — the sharpest spike since the 1970s.

Economists now say inflation in the overall food-at-home market has largely stabilized. Eggs are the only outlier.

Unlike the generally cooling grocery store prices, the housing market continues to see relentless price hikes — with no real signs of temporary relief. 

Experts are sounding the alarm.  ‘Housing is still a big piece of inflation,’ the president of Minneapolis’ Fed, Neel Kashkari, told CNBC. 

Housing inflation moves at a different pace than the rest of the economy, creating a lag that Kashkari warns could distorts the bigger picture. 

Inflation rates have cooled to near-target numbers. Year-over-year inflation cooled to 2.9 percent by December 2024. The Federal Reserve has a stated goal of keeping inflation around 2 percent. 

Grocery prices sunk to 1.8 percent, per the most recent CPI. Overall inflation remained at 2.9 percent. 

Grocery shoppers have paid more for their food since March 2022

But unlike gas or groceries, which react quickly to supply and demand shifts, housing costs take longer to adjust.

Rent increases from previous years are still rolling into official data, and formerly tight housing supply continues to push the economy’s prices up. 

That means even if grocery bills shrink and gas prices drop, previously high housing costs could make inflation seem worse than it actually is. 

Housing costs in the latest CPI sat at 4.6 percent. It was the third-highest rate of inflation in the latest readings.    

Kashkari said he is confident that housing inflation will eventually dip, much like the majority of the market. 

But he said it may take a long time for that to reflect in the overall data. 

‘We have a lot of confidence looking at the new leases,’ he said. ‘It takes a couple years for that to roll through the actual inflation data, so that should be helping us bring inflation back down.’

Still, grocery stores have several short and long-term headwinds that could make prices increase. 

Housing prices might keep overall inflation higher, experts warn 

Prices for at-home grocery prices have inflated at a lower rate than the market

Grocery inflation shifts faster than the housing market’s inflation

The U.S. is working through an egg shortage after a strain of bird flu forced farmers to mass-slaughter chickens. 

The national average price for a dozen eggs has more than doubled since summer 2023, and hit a near-record high of $4.15 in December last year.

Meanwhile, the Agriculture Department predicts prices are going to climb another 20 percent this year.

A longer-term strain on the grocery market may also be on the way after President Trump signed an Executive Order, assigning a 25 percent tariff on all imported aluminum and steel. 

The tariff could hit American wallets twice over. 

First, many food packaging giants rely on the metals to wrap their products. 

Second, several countries may place retaliatory tariffs on American exports, making domestically-produced products less competitive in their market. 

Canada, for example, threatened tariffs on American beer, wine, bourbon, and fruits. 

With less demand in foreign countries, Americans could end up paying higher grocery prices as domestic producers exit the market and dwindle supply. 

January 2025’s inflation measures are set to be released on February 12.