Groceries are getting cheaper, but it might not last

Average grocery prices have been dropping for the last couple of months.

The Consumer Price Index for food at home, one of the many subcomponents of the overall inflation rate measured by the Bureau of Labour Statistics, fell by 0.3% in February compared to a year before. That followed a year over year drop of 0.5% in January.

Those couple months of food deflation followed fairly low inflation for groceries throughout 2015, with year over year changes in food prices around or below 3%:

However, that drop in grocery bills might only be a temporary situation.

Kelly Bania of BMO Capital Markets observed in a note to clients, “We forecast 0% food inflation in 2016, yet based on our analysis of commodity prices and y/y comparisons, we believe food deflation may now be bottoming.”

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