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Food Prices Are Forecast to Increase 2% This Year

February 22, 2003|From Reuters

U.S. food prices will see a slight increase this year, thanks to intense competition in the food industry and consumer penny-pinching, the government said Friday.

The Agriculture Department forecast an overall rise in food prices of 2% this year. Fresh fruit and vegetable prices would rise the most -- as much as 5% -- but meat, fats and oils, and sugar and sweeteners would barely register a gain.

Food prices rose 1.8% last year, the smallest increase since 1992. Americans will spend about $915 billion on food this year, or less than 10 cents of each dollar they spend, the USDA said.

Ephraim Leibtag, the department's food price expert, said the slow economy was prompting Americans to limit their purchases of snacks, carry-out food and restaurant meals, which helped stabilize prices.

At the same time, grocers have had to keep prices in check because of competition from new outlets.

"I personally believe the dynamics of competition will keep food price inflation below 2.2%," Leibtag said at the USDA's annual outlook forum.

On Feb. 7, the USDA forecast food price increases of 2.2% for 2003. But at the forum, it released figures indicating an increase of only 2%.

Leibtag said the forecast of modest food price inflation could be shaken by war in the Middle East, a spike in energy prices or an economic recovery that encouraged Americans to loosen their purse strings.

Despite fear of a second year of drought in the United States, Leibtag said there probably would be little effect on food prices, although some items could be affected by bad weather. Raw and processed foods can be imported quickly from other nations to fill any gap, he said.

"Overall, food price inflation is going to stay stable," he said.

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