Why Food Costs Still Feel High to Consumers

American consumers are rightly suffering a case of cognitive dissonance when it comes to food prices these days: They keep hearing from officialdom that food inflation is under control, but every time they go to the supermarket or pay a restaurant bill, shoppers are reaching their own, opposite conclusion.

The all-items Consumer Price Index, a measure of economy-wide inflation, increased by 0.5% from January 2026 to February 2026 and was up 2.4% from February 2025.

But the federal government is predicting that prices for food will increase by 3.6% overall for 2026. This reflects the expectation that food-at-home prices will increase by 3.1%, while food-away-from-home prices increase by a whopping 3.9%.

Also now, the conflict in the Middle East has introduced some potentially long-term upward pressure on energy costs via higher oil prices.

Much of today’s consumer dissatisfaction with grocery pricing remains a legacy of the COVID era, when supply chain disruptions destabilized operations across the food retail sector.

Much of today’s consumer dissatisfaction with grocery pricing remains a legacy of the COVID era, when supply chain disruptions destabilized operations across the food retail sector.

The key year for building new perceptions of high food inflation was 2022. That year, food-at-home prices increased by 11.4%, while food-away-from-home prices increased by 7.1%, according to the U.S. Department of Agriculture (USDA). A perfect storm of factors in addition to COVID brought about those sharp increases, including an outbreak of highly pathogenic avian flu that affected poultry and egg prices, high energy costs, and the Russia-Ukraine war.

That was four years ago, but nevertheless, the leaps were the largest since 1979 and left a huge psychological scar on consumers after a long period of relative price quiescence. They seem to have created a permanent wariness about food prices. Food prices that had climbed only very gradually for decades were suddenly a new kitchen-table political issue.

At the same time, “shrinkflation” has emerged more strongly. Some food companies are reducing package sizes and volumes while pricing remains the same or even increases.

Combine these two forces and you’ve got “the classic boiling-frog scenario,” says Sam Bourgi, a finance analyst and researcher at InvestorsObserver, a Wall Street information house. “You don’t jump out of the pot because the water heats up one degree at a time. So, you adjust. By the time you realize how hot the water has gotten, you’ve already lost significant purchasing power.”

Prices and Politics

As retailers and restaurateurs largely locked in the higher prices of 2022 to boost profitability, Donald Trump successfully fanned the flames of food price inflation when he ran for president in 2024. He seemed to succeed in laying the new, scary tableau of significantly higher food inflation at the feet of President Joe Biden and the Democrats’ eventual candidate, Vice President Kamala Harris. Polling showed that food price inflation was a powerful issue among many consumers as they headed to cast their ballots in November 2024.

Prices have settled down quite a bit since then. And in certain categories, there have been price drops as dramatic as price increases a few years ago. The price of eggs, for instance—a major pain point for consumers last year—were down by 34% in January, year over year, while the prices of another avian-flu-affected staple, chicken, have fallen as well. That’s why President Trump was able to claim that “prices are plummeting downward” during his State of the Union address.

But the reality is more complex and largely at this point depends on the food category. The USDA predicts that prices for several major food-at-home categories, including pork, poultry, and fresh fruits, will climb more slowly than their 20-year growth rate.

Yet for eight other categories, prices are expected to grow faster than their 20-year average. They’re led by beef and veal, whose prices are expected to grow by 10.1% this year—after already posting a 14.4% increase in February of this year over February 2025. The U.S. cattle herd has declined significantly over the last few years while consumer demand has remained strong, led by the emphasis on increasing protein in the U.S. diet.

Prices for fish and seafood, fresh vegetables, processed fruits and vegetables, sugar and sweets, cereal and bakery products, and nonalcoholic beverages also are expected to grow more quickly than the 20-year average.

In certain categories, there have been price drops as dramatic as price increases a few years ago.

Meanwhile, new research published in the journal Marketing Science shows many consumers may be paying more for grocery products without realizing it because they are getting less product for the same price.

The study showed that approximately 1.9% of products in the U.S. retail food market were downsized during the observation period, compared with just over 1% that were upsized. When measured by total sales, downsizing was more than five times as prevalent as upsizing.

Shrinkflation occurs when companies reduce package sizes while keeping prices largely unchanged. The study showed that when package sizes shrink, consumers often respond by purchasing additional units, increasing their overall spending over time.

The study, Shrinkflation and Consumer Demand, was authored by researchers from Singapore Management University and Tilburg University.

“The consumer psychology behind shrinkflation is fascinating,” the authors wrote. “Rather than consume less to conserve their overall grocery bill, our research has found that consumers are more likely to focus on the per-unit cost and then buy more product units.”

Studying Shrinkflation

The researchers analyzed a decade of NielsenIQ retail scanner data (from 2010 to 2020), covering millions of products sold across tens of thousands of U.S. retail stores. They systematically identified cases in which a product was permanently replaced by an equivalent product of a different size.

 “To be sure, shrinkflation is not an isolated or new phenomenon. It has been happening consistently for over a decade across a wide range of grocery categories,” the authors wrote. “In most cases, package sizes shrink without a corresponding decrease in price, meaning consumers end up paying more per volume.”

 On average, prices per volume increased by roughly 12% in the year following a size reduction. In contrast, size increases were typically associated with slight decreases in price per volume.

To counterbalance their research, the study authors also looked at how consumers respond to size changes compared with direct price changes. Using demand estimation models, they found that consumers are significantly more sensitive to price than to product size changes.

 “We found that a 1% increase in price reduces sales by about 1.2%, whereas a 1% reduction in size reduces sales by only about half as much,” the author wrote. “This gap suggests that consumers are much less responsive to size changes than to price changes.”