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Food prices fall amid weak inflation

Food prices fall amid weak inflation
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The price of food fell a seasonally adjusted 0.4 percent in July, the first monthly drop in food prices since last April, according to the Commerce Department.

The retreat will be a welcome turnaround for consumers after the price of food at home, in particular, spiked in the early days of the pandemic, rising 2.6 percent in April, 1 percent in May and 0.7 percent in June before dropping 1.1 percent in July.

All in all, the price of food remains an unadjusted 4.1 percent higher since last year.

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Cailin Birch, global economist at The Economist Intelligence Unit, said the drop was "notable."

"This implies slightly softer demand, as demand for food out of the home increases; it may also imply that some food supply-chain disruption related to COVID-19 containment efforts is easing," she said.

The latest consumer price figures also showed a return to weak inflation, with a seasonally adjusted 0.6 percent increase in July, bringing the unadjusted total for the year to 1 percent. Prices had largely fallen in March, April and May as the pandemic sapped demand from the economy.

Birch said the data shows the U.S. has a long way to go in its recovery.

"Overall, we continue to expect headline inflation to remain muted in 2020, at an annual average of 0.7%, as the recovery in consumer demand fails to meet market expectations in the second half of 2020," she said.