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Inflation returns to food retail for first time since 2015

After falling for more than 1.5 years, grocery prices are headed upward, data published Aug. 11 by the Bureau of Labor Statistics showed.

The index for food at home, which tracks the price of food sold by retailers, farmers, manufacturers and home production, rose 0.3% in the 12 months ended July, according to a statement from the BLS, summarizing monthly changes in the Consumer Price Index. The increase is the first over a 12-month period since the 12-month period ended November 2015, according to the BLS, which is a division of the U.S. Labor Department.

The increase could signal a turnaround for U.S. grocers from Kroger Co. to Costco Wholesale Corp., many of which have cited price deflation as a drag on their earnings in recent quarters. Along with greater competition in the U.S. grocery business, falling food prices have weighed on grocers' profit margins.

To be sure, food price deflation has been easing in recent months. During a presentation to analysts June 15, Kroger CFO J. Michael Schlotman said deflation in early 2017 "was less severe" than it was at the end of 2016.

As deflation turns to inflation, though, prices for some groceries are rising faster than others. The CPI's index for meats, poultry, fish and eggs rose 0.7% in July, the fastest of the six grocery food groups the BLS tracks. Cereals and bakery products were the only group to decline over the 12 months to July, according to the statement.