Consumer prices rose 3.0% in June in comparison to last year to cool off from the 4.0% pace in May. Core CPI was up 4.8% year-over-year and was up 0.2% on a month-to-month basis to miss the consensus estimate of +0.3%.
Overall, food prices were up 5.7% in June from a year ago and tracked just 0.1% higher from May. Some of the food categories that are still showing elevated levels of inflation include cereals and bakery products (+8.8%), bread (+11.5), frozen fruits and vegetables (+12.5%), and candy and chewing gum margarine (+13.2%). Meat prices were only up 0.6% year-over-year, with pork prices actually dropping by 3.8%. Milk prices were also down 1.9% from a year ago and down 0.3% from the level seen in May.
What about eggs? Egg prices were down 7.9% when compared to a year ago and were 7.3% lower from May. Cal-Maine (CALM) is in general has been one of the biggest beneficiaries of higher egg prices.
What to watch: Returns for packaged food and beverage stocks have moderated in 2023, although the three-year return for Invesco Dynamic Food & Beverage ETF (NYSEARCA:PBJ) is still ahead of the broad market. The upcoming earnings reports from food companies are seen as key to setting the tone for the back half of the year – including the latest guidance from TreeHouse Foods (THS), SunOpta (STKL), Lamb Weston (LW), WestRock Coffee Company (WEST), Kraft Heinz (KHC), Hormel Foods (HRL), J.M. Smucker (SJM), Hostess Brands (TWNK), Flower Foods (FLO), BellRing Brands (BRBR), MGP Ingredients (MGPI), Post Holdings (POST), General Mills (GIS), Campbell Soup (CPB), Lifeway Foods (LWAY), Lancaster Colony (LANC), Bridgford Foods Corporation (BRID), TreeHouse Foods (THS), Kellogg (K), ConAgra Brands (CAG), Celsius Holdings (CELH), Vita Coco (COCO), and PepsiCo (PEP). Elevated food prices have also been providing a margin lift to major retailers. Watch Walmart (WMT), Target (TGT), Kroger (KR), Albertsons (ACI), Sprouts Farmers Market (SFM), and Costco (COST) for margin pressure if prices keep moderating.