Following the release of the April inflation data, the top headline in the Wall Street Journal noted that US inflation edged lower in April. While true, it is important to look past the headline. Inflation in April was higher than most economists expected and core inflation accelerated from the previous two months, rising 0.6% m/m. The slowdown in the pace of inflation in April was largely due to lower energy prices, which declined 2.7% from the previous month but price inflation for services and food was up 0.7% and 0.9%, respectively.

Food inflation has accelerated in the last few months as operators pass on higher costs to their customers. Grocery store inflation has far outpaced inflation at foodservice not because grocery stores are seeing more inflation but because they have the ability to respond more quickly to rising costs. Restaurants know that raising prices too quickly is a surefire way to lose customers. At the grocery store demand is a bit more inelastic and there is also a wider range of products, allowing customers change the mix of foods they buy. One of the big points of debate currently is how a change in the consumer purchasing mix (more pasta, less meat) is contributing to the palpable slowdown in red meat demand. Add to this a cool spring and good luck pinpointing demand.

Daily Livestock Report: Read More…