Grocery inflation is poised to begin accelerating over the coming months, as elevated fuel costs start to wear down retailers and suppliers that — until now — have been able to keep a lid on price increases for many products, food industry experts said Thursday during a briefing hosted by FMI — The Food Industry Association.
Grocery inflation in August came in at an annual rate of 2.2%, down from 2.7% during each of the previous three months, according to the Bureau of Labor Statistics. But the sustained increase in oil prices brought on by the Iran war this year is putting enough pressure on the grocery industry that retail prices are unlikely to remain in check as the year progresses, said Ricky Volpe, professor of agribusiness at California Polytechnic State University.
“We have evidence that there have been some explicit efforts by food companies, retailers, manufacturers throughout 2026 to keep prices down [to] remain competitive [and] address customer sentiment,” Volpe said. “But I do not think that can last forever, and I will be surprised if we don't see food price inflation tick up somewhat for the last quarter of 2026.”
Volpe said he expects the rising pressure from fuel costs to push grocery inflation to an above-average rate for 2026. The rate could hit an annual pace of about 2.7% for the year, he estimated.
Rising diesel costs pose a particularly potent threat to the industry — and ultimately grocery shoppers — because that fuel is so widely used, Volpe said, adding that the impact will filter through in phases. Underscoring that, higher fuel prices pushed up the producer price index — a key gauge of the direction prices are headed in — last month, he said.
Diesel prices hit a record of more than $6 per gallon earlier this month, J.P. Morgan reported.
The increase in diesel and gasoline costs since the war started at the end of February has already cost U.S. consumers more than $113 billion, according to a tracker run by the Climate Solutions Lab at Brown University’s Watson School of International and Public Affairs.
Higher transportation costs make it more expensive to move goods from distribution centers to stores, which puts pressure on retailers to raise prices for food, he explained. On the other hand, higher costs for storing cold products, running warehouses and other components of the supply chain driven by diesel prices can take longer to filter through, Volpe added.
Higher energy costs could also begin to push grocery inflation up during the coming months because farmers are heavily reliant on diesel and will soon need to make planting decisions for the next growing season, Andy Harig, FMI’s vice president for tax, trade, sustainability and policy development, said during the briefing.
