Every month, USDA’s Economic Research Service updates its outlook for how much grocery prices will rise over the full year, based on the newest inflation data available. The August update, posted August 25, lowered that outlook: food-at-home prices, the government’s term for what people spend at grocery stores and supermarkets, are now forecast to rise 2.5 percent for all of 2026. A month earlier, the same forecast stood at 2.8 percent.
What the August Forecast Actually Says
According to the USDA Economic Research Service’s Food Price Outlook, food-at-home prices are forecast to increase 2.5 percent in 2026, with a forecast interval running from 1.7 to 3.3 percent — the range USDA says captures roughly 19 out of 20 possible outcomes given the uncertainty in the model. The broader “all food” category, which folds in restaurants along with grocery stores, is forecast to rise 3.0 percent, with food-away-from-home alone forecast at 3.6 percent. Both restaurant and grocery forecasts moved in opposite directions on the historical scale this year: grocery inflation is now expected to land below its 20-year average pace of 2.6 percent, while restaurant inflation is expected to run above its own 20-year average of 3.5 percent.
That single 2.5 percent headline number sits on top of enormous variation underneath it. USDA tracks 15 separate food-at-home categories, and this month’s data show seven of them growing faster than their own historical averages while four are growing slower and two are expected to shrink outright.
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Why the Average Hides Two Very Different Stories
Eggs are doing most of the work pulling the overall grocery number down. USDA now forecasts retail egg prices will fall 30.8 percent for 2026, as flocks recover from the avian-influenza outbreak that spiked prices in prior years and fewer new outbreaks have hit the industry so far this year. Beef and veal are moving the opposite direction: USDA forecasts a 9.8 percent increase for 2026, driven by a domestic cattle herd that federally inspected beef production data show is shrinking, keeping wholesale prices at or above record levels for the season. A USDA Livestock, Dairy, and Poultry Outlook report tracks the production side of that same beef story in more detail.
Other categories fall somewhere in between. Sugar and sweets are forecast to rise 7.1 percent, driven largely by candy and chocolate prices. Nonalcoholic beverages are forecast up 4.3 percent, tied to higher coffee and tea costs. Fresh fruit is forecast up 2.9 percent and fresh vegetables up 5.9 percent, even though vegetable prices actually fell in the most recent month of data. A household’s own grocery bill will track these category-level numbers far more closely than the single 2.5 percent headline, depending on what is actually in the cart.
The 2.7 Percent Number in Circulation Is a Different Statistic
Some of the confusion around this forecast comes from a separate, similarly sized number. USDA’s own data show the food-at-home Consumer Price Index was 2.7 percent higher in July 2026 than in July 2025 — a straightforward year-over-year comparison for a single month. The 2.5 percent figure is not that number. It is a full-year forecast that averages projected prices across all 12 months of 2026 and compares that average to the full-year average from 2025, a methodology USDA describes in its own explanation of its forecasting approach. The two figures measure related but different things, and treating July’s year-over-year reading as the government’s forecast for the whole year overstates how settled the picture actually is this early in the year.
What a 2.5 Percent Year Means for a Weekly Grocery Budget
A forecast below the historical average is, in USDA’s own framing, good news relative to recent years — food-at-home prices rose 5.0 percent in 2023 and 11.4 percent in 2022 at the height of pandemic-era and avian-influenza-driven inflation. But a 2.5 percent increase is still an increase, layered on top of prices that were already elevated by those earlier years. For a household budgeting week to week, the more useful signal from this report is not the single average but the split beneath it: falling egg prices offer real relief in one part of the cart, while rising beef prices erase some of that relief in another. USDA says it will continue revising this forecast monthly as new Consumer Price Index and Producer Price Index data arrive, meaning the 2.5 percent figure itself is subject to change again before the year is out.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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