Why Grocery Prices Are Still High

General information, not financial advice. This article explains how things work in general. It doesn't consider your personal circumstances. Before making decisions about your money, consider getting advice from a licensed financial adviser.

Food inflation has slowed across much of the world. So why does your supermarket receipt still look like it did at the worst of the cost of living crunch? Because the number in the headline and the number on your receipt are measuring two different things. One is a speed. The other is a level. Once you see the difference, the grocery prices puzzle mostly solves itself.

The short answer

Inflation measures how fast prices are rising, not how high they are. When food inflation "falls", prices are still going up, just more slowly than before. For prices to actually come down you need deflation, and across a whole grocery basket that is rare.

Every CPI headline also compares this month with the same month a year ago. So the big jumps of 2022 and 2023 have dropped out of the comparison. They haven't dropped out of your trolley.

Food inflation is slowing almost everywhere

The pattern is remarkably similar across five big economies (each country measures food a little differently, so treat these as close cousins rather than identical figures):

• Australia: food and non-alcoholic beverages rose 3.2% in the year to September 2026, while overall CPI was 4.3% (ABS, 28 October 2026).
• United States: food at home rose 1.8% over the year to September 2026, down from a peak of 13.5% in August 2022 (BLS).
• United Kingdom: food and non-alcoholic beverages rose 1.3%, the lowest since September 2021 (ONS).
• Canada: food bought from stores rose 1.7%, the smallest rise since May 2024 (Statistics Canada).
• Euro area: food, alcohol and tobacco rose 1.6% in October 2026, on Eurostat's flash estimate.

In most of these places headline inflation is actually higher than food inflation right now, pushed up by energy and fuel. Grocery inflation has cooled; the overall cost of living hasn't.

Why the calm number still feels painful

The UK makes the point most clearly. Food inflation there is just 1.3%, yet the ONS food price index sits at about 144 (2015 = 100). In plain terms, a shop that cost £100 in 2015 now costs about £144. A 1.3% rise on top of that barely registers as relief.

The US tells the same story. Add up the yearly food-at-home rises from the end of 2020 to the end of 2025 and prices are roughly a quarter higher. A slowdown to 1.8% doesn't hand any of that back.

In Australia, the averages hide a lot of movement within the trolley. According to the latest ABS figures, fruit was up 10.2%, beef and veal up 5.8% and milk up 5.4%, while eggs fell 2.3% and coffee, tea and cocoa fell 1.0%. A few items getting cheaper doesn't offset the staples you buy every week.

Where your grocery money goes

The price on the shelf is the last step in a long chain: farming, processing, packaging, trucking, warehousing, store rent and wages. Energy and transport costs feed into almost every link of that chain, and they tend to reach the shelf late. That is why food makers in the UK have warned that cost pressure can arrive later and last longer than the headline suggests.

Are supermarkets to blame?

This is where Australia and the UK differ.

The UK's competition regulator, the CMA, reviewed grocery prices in 2023 and found that supermarket margins were not elevated compared with before the pandemic. It didn't find evidence that weak competition was driving food inflation overall.

Australia's ACCC supermarkets inquiry, finalised in March 2025, landed somewhere more uncomfortable. It described the market as a highly concentrated oligopoly in which Coles and Woolworths have limited incentive to compete hard on price, and found that ALDI, Coles and Woolworths had all increased their average margins over five years. Rising costs explain most of the rise in supermarket prices, but not quite all of it. We dig into this in more detail in our post on shrinkflation, supermarket margins and who sets grocery prices.

Is shrinkflation making it worse?

Shrinkflation is real, and it is irritating. But its effect on the overall numbers is smaller than many people assume. The US Government Accountability Office estimated it added less than 0.1 percentage point to the rise in US consumer prices between 2019 and 2024, though it mattered more in some categories. Statistical agencies also adjust for package size, so a smaller block of chocolate at the same price already shows up as inflation in the CPI.

It feels bigger than it is because you notice it on the products you buy most often. The fix at the shelf is the unit price, which tells you the cost per 100g or per litre regardless of the packet.

How to read the next CPI headline

When the next ABS release comes out, ask three questions:

1. Is this a speed or a level? A lower inflation rate means prices are rising more slowly, not falling.
2. Compared with when? A 12-month figure hides everything that happened before last year.
3. Which items? The average can be calm while the things you buy every week are still climbing.

Grocery prices are still high because they went up a lot and very rarely come back down. Slower food inflation is genuinely good news: it means the gap is no longer widening as fast. Real relief comes when wages grow faster than prices for long enough to close that gap.