Grocery store prices will probably stay elevated this year, according to economists at Goldman Sachs, continuing a COVID trend that has contributed to the high cost of living.
In a report to clients on Monday night, Goldman Sachs projected the food-at-home category of the consumer price index will increase by another 5% to 6% this year. The Wall Street bank cited a 6% jump in food commodity prices so far this year and "soaring costs" of some farming inputs, including a quintupling of some fertilizer prices.
"The stage has been set for further substantial increases in retail food prices this year," Goldman Sachs economists wrote in the report.
Grocery prices in the consumer price index have already jumped by 11% over the past two years, the fastest pace since the financial crisis, the bank said.
A perfect storm of bad weather, poor crop yields, tight inventories and strong demand have lifted food commodities nearly 40% over the past two years, Goldman Sachs said.
Food at home prices jumped by 6.5% in December from the year earlier, according to the Bureau of Labor Statistics. That's the biggest increase since December 2008 and it contributed to the hottest overall rate of inflation in 39 years. In December, there were large price spikes for meat (14.8%), chicken (10.4%), eggs (11.1%) and other items.
Analysts have blamed grocery price increases on the supply chain turmoil, the worker shortage, COVID-19 and other issues. As CNN Business previously reported, Kraft Heinz recently indicated it will hike prices on dozens of products, everything from Oscar Mayer cold cuts and Velveeta cheese to Capri Sun drinks.
But there is uncertainty over where prices go from here.
"We see risks in both directions," Goldman Sachs economists acknowledged.
The bank said price gains could be limited if demand declines due to an expected decline in food and nutrition benefits. On the other hand, grocery prices could go higher as "companies might pass along a greater share of higher input costs when these increases are larger or more durable."