Food Prices are Finally Falling, With One Major Exception

Checkout at the grocery store is finally getting a little less painful as inflation starts to abate—unless you need baby formula. 

Inflation has decelerated for 10 straight months, according to Consumer Price Index data released this week, slowing to 4.9% in April from 5% in March and giving budgets a reprieve from a relentless increase in the cost of living since 2021. Better yet for shoppers, grocery prices fell for a second month, although not every product dropped and some got even pricier, most notably baby formula. 

Grocery prices rose 7.1% over the last year—a steep hike, yet an improvement from August, when grocery inflation peaked at 13.5% year-over-year, the highest since 1979.

Parents of young children may not see their grocery bills dropping much: Baby food and formula jumped 4.3% over the month, the largest one-month increase in BLS data going back to 1998. Baby formula manufacturers say they're raising prices because a new FDA plan to more closely monitor baby formula production, intended to prevent a repeat of the shortage of 2022, is making it more expensive to produce.

“These actions will negatively impact supply and significantly raise the cost of producing infant formula,” said Murray Kessler, CEO of the store-brand baby formula manufacturer Perrigo, in an earnings call this week. “The substantial cost of these new regulatory requirements will be offset with a price increase.“

Prices for eggs (not shown on the chart) fell 1.5% over the month, on the heels of a steep 10.5% drop in March, giving food shoppers a break after prices soared last year, driven by a bird flu outbreak as well as profit-making by egg companies. Even after the recent decline, egg prices were 21.4% higher than last year. 

Other breakfast foods got the biggest price breaks, with oranges, bacon, and milk all falling more than 2%.