Grocery price disinflation over the past eighteen months looked broad. It was not. Roughly three quarters of it came from a single category — eggs, dairy and the protein complex downstream of feed costs — as the avian influenza outbreak resolved and grain prices normalised from their 2022 peak.
That category has now returned to its pre-shock trend. There is no more room in it, which means the headline number from here reflects everything else, and everything else never disinflated much to begin with.
Packaged goods are the clearest example. Manufacturer list prices in centre-store categories have risen at an annualised 3.1 per cent through the past four quarters, barely moving from the 3.4 per cent of the year before. The relief consumers noticed came almost entirely from promotional depth — retailers absorbing margin to hold traffic — and promotional depth is a lever with a floor.
The June print showed that floor. Food-at-home came in flat month over month, which several commentators read as a pause. The internal composition suggests something less benign: continued decline in the protein complex offset by acceleration nearly everywhere else.
For the Federal Reserve this is awkward rather than alarming. Grocery prices are not a policy target and do not enter the preferred inflation measure with much weight. For households they are the single most legible price signal in the economy, and legibility is what shapes expectations.