What the latest CPI data may mean for consumers’ food costs

Yahoo Finance reporter Brooke DiPalma previews the December CPI data and what consumers can expect with food prices in 2023 amid inflation.

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DAVE BRIGGS: Americans can expect an update on the state of inflation in America on Thursday with the release of December's consumer price index. Yahoo Finance's Brooke DiPalma taking a closer look at what we can expect when it comes to the cost of food. And that is what's been killing people all year round.

BROOKE DI PALMA: That's right. Well, of course, the cost of food associated with a broader outlook at the impact of inflation, of course, we're seeing higher prices. And so let's take a look at what Wall Street expects tomorrow morning. As far as month over month, they expect, actually, the inflation rate to decrease by about 0.1%.

But year over year, still up 6.5%. Now that headline CPI number there includes both food and energy. Now, of course, we are seeing the cost of energy actually trend down a bit. Crude oil prices are seeing below $80 a barrel. Of course, that helps with the cost of transportation of food, of course, to grow and produce and package this food.

Now but if you take a look at the trend overall, if you take a look at January this time last year to now, you see this sort of increase and some sort of deceleration here. So, of course, consumers optimistic that we'll see a smaller increase of both food-- that 10.6% increase year over year includes both food away from home-- and the cost of groceries. And consumer expectations particularly high. According to the Federal Reserve Bank of New York, their consumer expectations report, consumers expect that inflation will decelerate to 7.6% in 2023.

Now, of course, we are still at 10.6% as of November 2022. So that is a far way to go in order to decelerate from that number. Now, of course, one thing to note, too, is an equity analyst that I spoke to, Arun Sitaram, he said that most food manufacturers enter into forward contracts or hedges for raw material needs. So it could take a year or so until they actually benefit from lower input costs. And so we might see those food prices to not decrease until the back half of 2023. So some way to go until consumers will see some relief at the grocery store.

SEANA SMITH: Yeah, it might take some time. Brooke, what are some of the items that you're going to be paying close attention to? I know we talk so much about eggs and the fact that prices there have skyrocketed so significantly over the last year.

BROOKE DI PALMA: Yeah, well, let's first take a look at eggs, actually, of course. That is a big, big-- something that both consumers and Wall Street taking a closer look at. If you see here, month over month, in November, we saw 2.3% increase, and year over year, 49.1% increases. While those numbers staggering, that was getting some deceleration there.

But now, tomorrow's report, both Wall Street can expect a higher number. Of course, that avian flu outbreak certainly taking a toll. In November, year over year, 2021, we had 329 million hens laying eggs, that is. But in November 2022, that number dropped nearly 20 million, according to the USDA. So less hens, rather, to produce these eggs, meaning higher prices. And of course, that flu outbreak, when that happens, these farms then need to essentially destroy their flock.

Of course, some relief hopefully coming for both beef, veal, poultry, and pork. Economist I spoke to at Texas A&M, he said that he expects a decline for those protein categories to continue into December '22. Of course, keep in mind this is a read back a month.

DAVE BRIGGS: Cardi B is going to be mad, man.

SEANA SMITH: [INAUDIBLE] I'm going to be mad.

DAVE BRIGGS: Cardi B is going to go off.

SEANA SMITH: Man, I'm sick of hens. So, yeah, every time I got to the grocery store--

BROOKE DI PALMA: Yeah, talk about the everyday American getting hurt.

SEANA SMITH: Yeah, and certainly, it shocks me every single time. All right, Brooke DiPalma, thanks so much for that.