Retail food prices rising more slowly than expected

Retail food prices in the United States are rising at a slower pace than expected a month ago as the recession slows demand for pork and fresh produce, the government said this week.

Food costs will rise by 1.5 percent to 2.5 percent this year, which is less than the estimate in October of 2 percent to 3 percent, the U.S. Department of Agriculture said. An increase at the lower end of that range would be the smallest gain since 2002. The USDA left its forecast for 2010 unchanged at a 3 percent to 4 percent rise.

"Pressure on retail-food prices has subsided, resulting in low-to-moderate food-price inflation in 2009," Ephraim Leibtag, a USDA economist, said in a note accompanying the report.

Lower food prices reflect declines in commodity costs, with pork expected to fall as much as 1.5 percent this year, the department said. Hog futures slipped 8.2 percent between late April, when an outbreak of swine flu lowered consumer demand for pig meat, and Tuesday.

Fresh produce and dairy products also are expected to decline this year, with fruit and vegetable prices dropping 1 percent to 2 percent and dairy products slipping 6 percent to 7 percent, the USDA said.

Food inflation last year was 5.9 percent, the steepest annual gain since 1980, according to the Bureau of Labor Statistics.

Prices are expected to start rising in coming months, Leibtag wrote, as energy costs begin to climb with economic recovery. Crude-oil futures on the New York Mercantile Exchange were up 70 percent this year through yesterday.

"As energy prices have started to rise over the past few months, overall consumer inflation should soon return to positive annual levels and put an end to the recent deflationary period," Leibtag wrote.