Grocery Store Retail Sales Start 2018 with Solid Gains

Grocery store sales growth in January was up 4.5% from twelve months earlier, the biggest monthly year-over-year gain since January 2015. That increase helped to offset a modest 1.8% increase in food services and drinking place (i.e. restaurants, etc.) retail sales. Part of the story is tied to the base of comparison, January 2017 retail sales. A year ago, grocery store sales were only up 0.2% from January 2016 while food services and drinking place sales were up 4.3%. January 2018 retail sales, economy-wide, were up 5.1% from a year earlier, reinforcing the picture of a healthy US economy during the current quarter.

The grocery store sales trend builds on positive momentum at the end of 2017, with both November and December sales 3.7% higher that twelve months earlier. Annual grocery store sales growth has averaged 2.2-2.3% for the last three years but should climb above that range this year, based on recent trends, possibly reaching 4.5%. That would be the fastest growth pace since 2011, when grocery store sales increased by 5.1%.

Food sector sales growth (grocery store plus food service and drinking places) during January was up 3.1% from a year ago. As was the case for grocery store sales, that was the fastest January growth since 2015. In January 2015, food sector retail sales surged 7.8% compared to January 2014 on a very stout 11.7% jump in food service and drinking place sales.

Wholesale demand for the three leading meat commodities (beef, pork and chicken) trends are generally consistent with the consumer spending situation. The Choice beef cutout will be up this quarter from the last quarter of 2017, which is a little better indicated at the end of last year that were driven by an outlook for larger beef production. Similarly, the pork cutout has also gained value this quarter from late 2017, even with larger pork production. Chicken breast meat prices at the wholesale level have held steady in January and February, in line with expectations at the start of the year. Chicken wing prices in wholesale trade have been surprisingly weak so far this year, which may be a consequence of modest sales growth in the food service and drinking place sector so far this year.