I’m an Economist: My 3 Predictions for Your Grocery Bill in 2025

Grocery prices have outpaced inflation in recent years. From 2020 to 2024, the cost of food at home rose by roughly 25% whereas inflation went up by 19%, according to data from the Bureau of Labor Statistics (BLS). The cost of most everyday goods has recently stabilized, but food is still expensive even as the end of the year approaches.

A Yahoo Finance/Ipsos survey from late 2023 found that American consumers are still feeling the effects of inflation, particularly in the areas of food and housing. More than two-thirds of survey respondents said food prices have been the most impacted by rising costs. Most respondents also believe that prices will continue to rise throughout 2025.

But what do economists think? Here’s what a couple of them shared with GOBankingRates .

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Prices May Stabilize, but They Won’t Drop

Grocery prices may not have risen quite as quickly as in recent years, but they’re not low either. In a recent interview , Dawn Thilmany, an agricultural economist and professor at Colorado State University, said it’s unlikely that they’ll drop anytime soon.

“I think people are waiting for prices to return to what they call ‘normal’ — and with the exception of a few things, like eggs — we’re not going to see that,” Thilmany said. “We’re going to see prices stabilize, and that’s likely it.”

There are several reasons why grocery prices remain high. Amongst other things, environmental factors, ongoing supply chain issues and labor shortages leftover from the height of the pandemic prevent them from seeing a true decline.

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Certain Foods Might See a Decline — Eventually

Inflation measures the rising costs of everyday services and goods. Disinflation, meanwhile, occurs when the rate of inflation is still positive but starts to fall. This is what’s been happening in recent months in the U.S. In the 12-month period ending in July 2024, the average annual inflation rate in the U.S. was 2.9%. Before that, it was 3% — a minor but still significant shift.

Disinflation is a slow process, one that can take months or even years to occur. As inflation has started to slow, grocery prices have also seen a more nominal increase.

Some foods have actually decreased in price. In the world of economics, this is called deflation. Egg prices, for example, dropped by more than 20% in 2023. Certain produce, like tomatoes and lettuce, also dipped during that same year.

Some economists believe that prices will continue to increase slowly or, perhaps, even decline slightly. But it will take time as things often do.

“It wasn’t until last year — three years into the pandemic — that we made big strides on ending the labor shortages,” said Claudia Sahm, an economist who previously worked at the Federal Reserve. “So it’s going to take some time.”

In general, deflation doesn’t happen all at once. Nor does it impact all parts of the economy equally. But as labor shortages continue to be addressed and costs start to become more palatable, consumers may not feel the hefty price tag at checkout quite so much as before.

Consumer Demand Could Keep Prices High

Labor shortages aren’t the only thing that have kept food prices high. Consumer demand is another big one, one that might continue to impact prices next year.

According to Thilmany, the demand for certain types of foods — like nuts, meats and fresh fruits and vegetables — has been elevated this year. There are several possible reasons for this.

One is wages. The BLS found that wages and salaries rose by 4.1% in the 12-month period ending in June 2024. They also rose by 4.6% in June of last year. While many Americans still struggle financially, this has freed up some extra cash in many people’s budgets.

Directly tied to higher wages is greater spending. More consumers are splurging on high-quality, specialty food items. This includes organic foods, which generally cost more than their nonorganic counterparts.

Before the pandemic, American consumers were starting to spend less on food. But back in 2022, the USDA found that American consumers spent more of their household budget on food than ever before. During that year, people allocated over 11% of their disposable income to food — including dining out and groceries. This is the highest percentage it’s been since 1991.

This increase in spending has stuck since then, and could continue to set the trend going forward.

“People started spending a ton on groceries during [COVID] and for a large subset of Americans, that’s stuck,” said Thilmany. “They’re saying, ‘I’m still going to get that rib-eye or New York strip even if it costs more’ — and that pushes prices further up.”

Grocery Prices Will Likely Continue To Rise

High inflation in recent years, even though it’s slowed down in the past few, has made a lot of things more expensive than ever for Americans. Due to this, groceries are still a major concern for many and eat away a large percentage of household budgets.

Food prices saw one of the biggest changes of all time in 2022 when they rose by about 12%. An estimated 45% of consumers experienced food insecurity due to these higher prices. And while prices have mostly leveled off — aside from in a few food categories — consumer demand (among other things) could keep them high well into next year and beyond.

This article originally appeared on GOBankingRates.com : I’m an Economist: My 3 Predictions for Your Grocery Bill in 2025