Food prices rise 10.1% year-over-year, according to the BLS

Yahoo Finance food reporter Brooke DiPalma discusses the January CPI report and the latest food inflation data.

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DAVID BRIGGS: January's CPI report is giving consumers an inside look at where prices remain high. Brooke DiPalma is here to break down what type of groceries may still give you sticker shock or, rather, maybe a stomach ache. It is just ugly out there.

BROOKE DIPALMA: I know. The feeling of seeing those numbers at the store just make your stomach upset, for sure. But hopefully, some hope here. Cereal and bakery products up 12-- sorry-- up 1.2% year over-- month-over-month, that is, as well as-- well, we're taking a closer look here at year-over-year. Let's go with that.

Cereal alone up 15%. Of course, higher price of other ingredients as well as elevator costs of labor and fuel costs. Eggs continuing to drive that category, higher up more than 70%. Dairy, as you can see there, up 14%. Fruits and vegetables brought higher by frozen vegetables, up 18.6%. Carbonated drinks driving that last category higher. Carbonated drinks alone were up 14.3%.

But let's take a look at month-over-month. So, of course, that's December 2022 compared to January of 2023. Cookies leading the way of the cereal and bakery products. Cookies alone up 2 and 1/2%. Ham and eggs both leading meat, poultry, fish, and eggs category higher. Eggs, of course, still higher, up 8.5%, largely due to that avian flu outbreak.

Fruits and vegetables up 0.5% there. Of course, citrus fruits is something we're watching closely as we saw lower production in Florida, which was caused by a freeze last January, damage from Hurricane Ian, as well as disease known as citrus greening. But overall on an unadjusted basis, food at home going up 0.8% in January, up still 11.3% from a year ago.

DAVID BRIGGS: And largely this is what explains why people are so discontent with the economy despite what the jobs numbers show. And boy, orange juice is a problem.

BROOKE DIPALMA: Right.

DAVID BRIGGS: The price of groceries continues to outpace the cost to dine out. What's the impact on restaurants and mega fast food chains?

BROOKE DIPALMA: Yeah. Well, when you think about restaurants overall, they've been faced with higher commodity prices, higher wage prices. And when you take a look on a yearly base-- rather on a monthly basis of food at home and food away from home, that food away from home continues to increase at a lower rate compared to food at home, so consumers thinking that they could dine out and perhaps get a deal here. But most importantly, consumers are looking for value at fast food chains.

And we're hearing across the board from C-suite executives on their earnings calls, for example, Yum! Brands CEO David Gibbs saying, quote, "Higher-income customers are coming more frequently. We're not seeing the low-income consumer drop out of our business. What we are seeing is that they're probably a little bit more focused on value." So CEO Gibbs later on saying that "we're winning because of value."

Dave, we have the Taco Bell Cravings Menu. We have a $2 burrito. KFC also coming out with wraps, two for $5 deal there. McDonald's saying a similar message here. Their CEO Chris Kempczinski saying on their Q4 2022 call, "We need to balance passing through our pricing on our menus while maintaining our strong position on value with customers."

Now, they said later on in the call they were seeing a bit of a trade down, but not nearly as much as they expected in Europe and the US compared to six months or a year ago. CMG-- CMG, rather, Chipotle there has a typical higher-end income audience there. And they're saying that the purchase frequency has actually gone up, but they did note a challenging macro environment that they saw as last quarter.

DAVID BRIGGS: They saw those that make $100,000 start to trade down. But those that make $75,000 and less started to eat less Chipotle. Yeah, so it really is a tale of--

BROOKE DIPALMA: A balancing act.

DAVID BRIGGS: Yeah. McDonald's, though, they happen to have a lot of pricing power at the moment. Brooke, thank you.

BROOKE DIPALMA: They have value.