Are Grocery Prices Actually Going Down?

For the first time since 1960 grocery prices have dropped for 9 consecutive months here in the U.S. So far this year, overall prices have declined by slightly over 2% against last year’s prices and in some key categories they dropped even more dramatically according to the U.S. Bureau of Labor Statistics. This is certainly good news and an unexpected “gift” after years of steadily inflated food prices that were at a zenith as recently as a year ago. Things such as shorter supplies, avian flu, and viruses affected beef, pork, and chicken supplies around the country. Grain prices were hurt by severe weather and drought which also made prices jump.

After years of high food costs, could grocery prices actually be going down? Here's what's going on, what it affects, and how to take advantage.

Prices Are Dropping

The result of the current recovery of the beef, pork, chicken, and fish industries from the hit that they took has resulted in the biggest drop in prices of the “protein” categories which are approaching 7-10% savings versus last year at this time. Even eggs supplies and prices have made dramatic recoveries from the outrageous prices of last August 2015 when a dozen eggs hit over $3.00 to dropping now to under $1.00 a dozen this past month. The 8 cent egg has been reborn and we haven’t seen those prices in years!

Some parts of the U.S. have seen price drops greater than others. The Houston metro area has seen some of the largest price declines, more than a 5% overall decline this year.

Food deflation is expected to stick around for at least the next six months according to Richard Galanti, CFO of Costco, whose stores have been heavily involved in promoting and making these categories big customer draws in this highly competitive industry of the world of groceries.

The Competitive Environment

And speaking of competition, food wholesale cost is not the only reason that retail pricing has been dropping this year. Retailers are practically beating each other over the head to draw customers, expand their base, and get you in to their stores with the most aggressive marketing and advertising they’ve offered in years. Whole Foods, for example, sometimes referred to as “Whole Paycheck” because of its notorious high prices for organic products, has been systematically lowering their prices to be more competitive.

This is also the trend from supermarket leaders like Kroger and mass marketers like Wal-Mart in all of their food categories. So much so, that they are even giving up profits and seeing their stock prices decline in order to draw more customers by cutting their own margins. They could pocket additional margin by just taking advantage of the wholesale price decline and maintaining some of their retail prices but they have chosen not to do that.

This cutthroat competitive atmosphere hasn’t slowed as every retailer from national drug store chains to Family Dollar stores have added and expanded their refrigerated sections to accommodate a larger line of food choices. Many, including myself, take advantage of that and with the promotions, coupons, and loyalty cards are getting some of the best deals around! And just recently, a German retailer, Lidl, announced their expansion into the U.S. that will add 3 huge distribution centers and many new stores along the east coast in 2018. They are Aldi’s chief competitor in Europe and operate similar type stores that are highly competitive.

The once exalted buy one, get one free or BOGO as we have come to know it (and love it) has erupted into the buy one, get two or even three free in this rush to be the most aggressive food retailer in town. You will find these kinds of deals in the meat section now where you once would never see that, and we do love those don’t we!

Some Exceptions

There are some areas that haven’t seen a decline in pricing, and you probably have noticed this all on your own. Fresh fruits and veggies continue to see increases in their retail prices. As the assortments grow from distant countries that our changing demographics are demanding, prices are rising.

The impact of the grocery retail pricing strategy has had an effect of some of the fast food dining establishments. Surprisingly, McDonald’s, Burger King, and Wendy’s same store sales have declined this year, even though the cost of beef, chicken, and fish has dropped. Experts believe that with the lower grocery prices, families are buying more groceries and eating at home more often to get a better, more healthy meal rather than the “fast food” experience that may be cheap but questionable in its effect on your body. The fast food industry continues to try many new items and pricing strategies, but nothing has changed the downward trend over the past year since the grocery stores have begun their competitive programs.

Effect on Seniors

The Market Basket that is used to gauge these price drops is the same one that is used to calculate the cost of living adjustments for Social Security every year so it can be deduced that food prices will have the effect of limiting or preventing any COLA adjustments for the year 2017. Combining the oil and gas price reductions we’ve experienced now for the past year, projections as of this writing are calling for as little as a 0.2% increase in Social Security checks for next year (the official announcement comes in the next 2 weeks).

Many senior citizens who do not use as much gasoline and who do not buy as many groceries as a larger family does will tell you that they do not see nor agree that the cost of living isn’t increasing for them at a greater than 0.2% rate. The reason for that may be that the cost of healthcare and prescriptions that continue to rise and easily negate the savings at the supermarket.


It pays to repeat that you can save even more when you plan and budget your food shopping with thought and knowledge of the current promotions and discounts. That’s why I urge you to make sure you use the manufacturer and store coupons, discounts, and loyalty cards they offer and check all the ads online and in the flyers, mailers and newspapers (you remember those right?). And if you have room to store your purchases, stock up when the price is right to insure yourself against future price increases.

Have you noticed the competitive wars going on in your grocery shopping adventures? Are you finding that your savings has increased this year? What ways are you increasing the savings to have more healthy meals at home for yourself and your family?

22 Comments

  1. Emily @ JohnJaneDoe

    And here I was, thinking that my grocery budget was on track due to smarter shopping strategies. I’m almost bummed.

    I’ll take savings where I can get them, though, even if they are temporary. Cheaper gas and cheaper groceries have saved us a lot this year.

  2. TJ

    I definitely haven’t noticed much personal inflation in my grocery shopping. I’m buying more grocery food for sure, but the reduction in dining out more than makes up for it, I think. October will be my first full month of mostly cooking breakfasts and dinners, it will be interesting to see what the final total actually ends up being.

    1. TJ, you make a good point about how much dining out can really add to your monthly food bills. By watching that, you’ll definitely cut your expenses. You may wind up buying more groceries, of course, but you will have the satisfaction of having better control over what you eat and what you spend your money on. Thanks for your comments.

  3. Jayson @ Monster Piggy Bank

    I don’t notice much inflation in grocery, but meal planning and using of coupons have helped me to keep the expenses minimal and to save some on groceries. Thanks for the information, Gary.

  4. We’ve seen a reduction in dairy prices here in our part of Michigan. It’s helped a lot.I think the biggest help for me in the grocery store has been knowing the prices. Some people have a price book so they know for sure when there is a good deal. Between me and my husband one of us always remember. When there is a good deal then we stock up. Last week it was a great deal on soup.

    1. Even though the national trend has shown that overall prices are declining, it may not be true in every area of the country. In fact, it isn’t even true among all groceries as I noted that prices on fruits and vegetables have been going up. In order to maximize your savings, it is necessary to supplement with other good shopping habits which can really make a difference. Thanks, FF.

  5. I truly believe that grocery chains are in a deflationary environment. I spent $86 the last 2 weeks on food because I packed my lunch to work and cooked at home. That is insane! I also get a 6% cash back on grocery spending so I basically only spent $81 on food. I have to love the savings and ALDI!!

  6. I haven’t noticed the cost of food going down here accept for eggs – we just bought a 30 pack of small eggs for 99 cents. I did notice the prices are very similar at the three stores I’ve shopped at recently in the Milwaukee area – Pick’n Save, Sentry and Meier’s. Apparently that is the trend since Meier’s entered the Milwaukee market.

  7. Jack @ Enwealthen

    Nice to see some prices going down somewhere. Haven’t seen much of it in my shopping list, but we focus primarily on real food, not processed. And in my experience, it’s harder for the real food to go down when it’s hard to hide what’s being done to it…

  8. Egg prices have certainly gone down since the avian flu has passed.

    I have been watching a stock called CALM (they control about 25% of the egg market) for awhile wondering if it made sense to buy. I am afraid of buying a falling knife so may wait until grocery prices start to stabilize.

    I love the overview that you did and can’t wait to read more.

  9. Fruclassity (Ruth)

    In Canada, we’re always a bit behind our neighbours to the south in trends like these. I hadn’t noticed lower food prices, but I just did a quick Google search, and Canadian prices are stabilizing after years of steady increases. Let’s hope the price fall happens here too : ) (Mind you, I won’t count on anything with your election coming up in November. Who knows how things will be impacted? From grocery prices to everything else.)

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