Grocery Prices Slip in September While Coffee and Produce Climb

A small grocery dip in a hot inflation month

In September the grocery aisle was one of the few places where prices did not go up overall. Food-at-home prices fell 0.1% on a seasonally adjusted basis from August, according to Bureau of Labor Statistics data. That left them 1.8% higher than a year earlier.24 The 1.8% figure is well below headline inflation, which reached 3.7% in the same report. That made groceries one of the better categories for consumers this month.21

The rest of the report was much worse. Consumer prices rose 0.6% in September, up from a 3.4% annual rate in August and above the 3.6% economists had expected.22 Gasoline rose 9.1% for the month and made up more than half of the headline increase.27 Core CPI, which excludes food and energy, also came in above forecasts at 2.6% year over year.22

The September grocery dip is real, but it looks more like a pause than a turning point. Costs are still building further up the food supply chain, and they have not yet shown up in what shoppers pay.

What got cheaper

Most of the relief came from protein and staple foods. Meat, ice cream and bread all got cheaper in September.21 Meat prices fell 0.9% for the month and were 1.3% above their level a year ago.21 Bacon is now 3.3% cheaper than a year ago. Chicken prices also fell during the month, although they remain 1.3% higher than last September.24

Eggs, once the main symbol of grocery inflation in political debate, have kept falling. Point-of-sale data from NIQ shows average egg prices down 31% since January 2025, well below their spring 2025 peak.23 At the wholesale level, producer prices for chicken eggs dropped 39.7% in September alone.27 The USDA's Economic Research Service expects retail prices for eggs and for fats and oils to finish 2026 below 2025 levels. It also forecasts dairy prices to be nearly flat, rising just 0.1%, as milk production grows.25

Retailers are trying to take credit for the price cuts. Aldi is running an autumn promotion that puts almost a third of its everyday items below last year's prices, including $1.99 chicken breast packs. Circana data shows avocado prices down nearly a fifth from a year ago.30 Walmart and Costco are reportedly putting billions in U.S. tariff refunds toward lower prices on some items. Kroger has promised to bring its prices closer to those of discount chains.30

What got more expensive

Prices rose for coffee, candy and fresh fruit.21 Fresh fruits and vegetables were up 4.9% from a year earlier, which is faster than overall inflation.21 Within that category, apples rose 7.5% over the year and tomatoes 6.8%.26 Tomatoes face two problems at once. Weather damage in Mexico, a major supplier to U.S. grocers, has cut production, and a tariff on Mexican tomatoes that took effect last year has raised costs for exporters.24 Drought-driven shortages pushed coffee up more than 7% over the year.21

Seafood is up more than 6% from a year earlier. Uncooked ground beef is up 5.4%, although it fell 0.8% from August to September.26 Over a longer stretch, NIQ data shows ground beef up 17% and orange juice up 23% since January 2025.23 The USDA expects beef to stay the biggest pressure point. It forecasts a 9.4% rise in beef and veal prices for 2026 because production is set to stay below last year's levels. It expects sugar and sweets to rise 6.6%, driven mainly by candy and chewing gum.25

Copies of the same wire report don't fully agree on some details. One version gives the 4.9% produce figure for July rather than September, and it says the BLS released the data on Thursday instead of Wednesday.2621 The overall direction is the same in every version, but those details are worth checking before relying on them.

Why the pause may not last

The strongest reason to doubt September's relief comes from wholesale prices. The Producer Price Index rose 1.3% in September and 6.3% from a year earlier. Those are the largest monthly and annual increases since 2022.29 Producer food prices rose 1.2% even though consumer food prices were flat. Fresh and dry vegetables were among the categories pushing that number up.27 One investment executive pointed out that food looks stable at the checkout while costs are speeding up earlier in the chain.27

The driver is fuel. Price spikes earlier this year came partly from the oil shock caused by the Iran war, which raised diesel costs. Grocers then passed on higher trucking and shipping costs.24 Produce and some meats are especially exposed, because they spoil quickly and leave little room to absorb sudden supply-chain costs.21 Long-haul trucking spot rates are up about 50% from a year ago. Packaging and inputs such as aluminium, corn, soybean oil and urea fertiliser have all risen by double digits.30

Food makers are already announcing price increases. Campbell's has told retailers it will raise prices 4% to 5% on 60% of its products. Conagra is raising prices on frozen foods. PepsiCo's chief executive has described a new wave of inflation linked to energy and agricultural costs.30 Food economist Ricky Volpe told the Financial Times that food price increases look hard to avoid over the next two to three months. He does not expect a repeat of 2022, when food inflation passed 10%.30

Private price trackers support that view more than the government figures do. A Consumer Edge food price index was running about 4% above last year in recent weeks, up from a low of 3.3% in August. Numerator found everyday household prices up 0.7% in September after two months of declines.30 Those figures sit well above the official 1.8% annual grocery rate. That suggests the September CPI dip may already be out of date.

Spending is mostly going to fuel

On the surface, retail sales look strong. September sales rose 0.8% to $745.0 billion, beating forecasts, after an upwardly revised 1.3% rise in August.13 But gas stations, where receipts jumped 6.4%, account for about 71% of that increase. Excluding autos and gasoline, sales rose only 0.2%, a figure that is statistically no different from zero.13 Spending at food and beverage stores rose 0.4%.11 Retail sales figures are not adjusted for inflation, and TD Economics estimates that real sales volumes grew just 0.1%.14

The overall reading is consistent: shoppers are paying more for fuel, not buying more things. Oxford Economics said almost all of the September jump came from gasoline. It expects spending to slow heading into the holiday season.15 BDO's retail practice said many shoppers are relying on savings and promotions to make their budgets stretch.15 Restaurants were an exception, with sales up 1.1%.17 That suggests some households, likely wealthier ones, are still spending on discretionary items.

Confidence is near record lows

Survey data shows how consumers feel about all this. The University of Michigan's preliminary October sentiment index fell to 46.3 from 48.1. Its measure of current economic conditions dropped from 50.9 to 44.7.7 Consumers' one-year inflation expectations rose to 4.7%.3 The biggest drops in confidence came among lower-income households and people with smaller stock holdings.4 The LSEG/Ipsos index fell to 45.2, its lowest since October 2011 and below its May 2020 pandemic low.5 The Conference Board's index fell 6.7 points to 81.9 in September.7

Low confidence has not caused a broad pullback in spending, because higher-income households are still spending.3 Circana found that consumers plan to spend an average of $779 on the holidays, down from $796. It also found that 74% plan to save money through promotions and store brands.3

Subscription prices keep climbing

The pressure on household budgets goes beyond groceries. Disney+ and Hulu raised their ad-free standalone plans by $2.50, or 13%, to $21.49 a month. It is their fourth price increase in four years.32 Peacock, Apple TV, Netflix and Amazon's ad-free Prime Video option have also raised prices this year.36 Streaming prices have risen about three times faster than overall inflation since 2022.39 For households already reworking their budgets around fuel, these monthly charges are an easy target for cuts.

The bottom line

September's grocery figures offer real relief on meat, eggs and dairy. That relief is unlikely to last. Wholesale food costs are rising, food makers are announcing price increases and private trackers are already showing faster inflation. Shoppers will probably see higher grocery prices again before the holiday season ends.