Inflation Update: Catalina Shopping Basket Index Tracks Q2 Price Hikes in U.S.

Even as inflation shows signs of easing in the U.S., prices in several popular grocery categories have continued to outpace the rate of inflation over the past year, according to the Catalina Shopping Basket Index. Tapping into its rich, real-time Shopper Intelligence Platform, Catalina looked at the aggregate price increase of 10 common product categories in the U.S., in Q2 of 2023 compared to the same period in 2022.

U.S. shoppers continued to face double-digit price increases in nearly every category compared to the same period a year ago, dropping slightly overall to 15% from 16% in Q1 2023. These prices are considerably higher than the Consumer Price Index’s 6% rate of inflation for food at home in Q2 2023.

The U.S. Department of Agriculture forecasts grocery prices could rise anywhere between 4% to 9% this year — much higher than the two-decade historical 2.5% inflation rate for supermarket food.

If inflation continues to recede as the last half of the year unfolds, don’t expect grocery prices to fall evenly or quickly across categories. With grain exports suspended in Ukraine and Russia, higher labor costs, and record weather events impacting the supply chain, we anticipate the cost of groceries to continue to fluctuate throughout the remainder of 2023.

Q2 Grocery Prices Remain High but Begin to Stabilize
The Q2 Catalina Shopping Basket Index reveals the average prices for Hand & Bath Soaps (+17%) and Soaps & Detergents (+8%) are higher than a year ago but the inflation rate has stabilized, remaining the same as Q1. The rate of inflation slowed for five of the 10 product categories, but they also still cost significantly more than they did a year ago. Compared to Q2 2022, Cereal (+18%), Coffee (+13%), Frozen Prepared Food (+12%), Yogurt (+14%) and Deodorants (+10%) posted double-digit price increases. The prices of Paper Products, Soft Drinks, Mixes & Water and Frozen Vegetables continue to rise. In an encouraging sign, prices in seven of the 10 categories declined or remained stable during Q2 2023 vs. Q1 2023.

Chart comparing average inflationary price changes of select consumer product goods (CPG) from Q1 2023 vs. Q2 2023

Units Sales Slow, Many Products Cost $1 More than Q1 2022
The Catalina Shopping Basket Index indicates average units sold per store were down 5% in Q1 and 7% in Q2, likely in response to higher prices. The average cost of items in nearly every product category has risen by about one dollar since Q1 2022, with the price of Hand & Bath Soaps jumping even higher by $1.44. The only exceptions are Yogurt and Frozen Vegetables, which cost only about 50 cents more than Q1 2022.

More shoppers may be shortening their grocery lists while on the lookout for coupons and other value incentives, while looking at Big Box and dollar stores for better deals. Price increases instituted by many CPG marketers earlier this year are also undoubtedly in play.

Chart comparing average unit prices of select consumer product goods (CPG) from 2022 vs. 1st and 2nd quarters of 2023

Shopper Splurges Vary by Category
Although consumer optimism is rising, spending is not - regardless of demographics - according to McKinsey’s latest consumer sentiment report†. But those surveyed said if they do splurge, they’re most likely to spend any extra funds on food – either dining out or eating at home.

Catalina’s Shopping Basket Index shows trading up or down differs by category. For example, Value Round Pizza unit sales were down 18% in Q2 compared to 2022, but Premium Round Pizza sales were up 2% for the same period. In Q2, shoppers were still more likely to buy Value Bath Tissue (+4%) with Premium Bath Tissue unit sales down 10%.

“This creates a big opportunity for grocery retailers and CPG brands to fight for their fair share of incremental dollars by promoting quality,” said Catalina’s Alice Fang, VP of Field Analytics. “Private brand share has remained steady across categories this year, indicating that shoppers will buy higher priced brand name products when incentivized to do so.”

† McKinsey, State of the U.S. Consumer, July 2023