USDA Revises Food Price Outlook, Slowing Grocery Inflation but Lifting Restaurant Costs
Agency now sees overall food prices rising 3% in 2026, with grocery inflation easing but dining-out costs accelerating
USDA made notable revisions to its food price outlook, projecting overall food prices to rise 3% in 2026, compared with 2.5% in 2025, while signaling a meaningful split between grocery and restaurant inflation. According to USDA’s Economic Research Service (ERS), grocery prices are now expected to rise a more modest 1.7%, down from 2.3% in 2025, while food away from home — restaurants and foodservice — are forecast to jump 4.6%, accelerating from 3.8% last year.
The updated outlook marks the first revision since September and incorporates more recent inflation data, including the December 2025 Consumer Price Index and November 2025 Producer Price Index, which USDA said were needed to refine its estimates. In September, USDA had projected a milder 2.7% increase in overall food prices, underscoring how sizable the revisions are in this update.
Key drivers inside the forecast
USDA now expects six of 15 grocery categories to rise faster than their 20-year historical averages, including beef and veal, other meats, fresh vegetables, sugar and sweets, nonalcoholic beverages, and other foods. Beef and veal prices are forecast to surge 9.4% as cattle inventories continue to shrink while consumer demand remains resilient. In contrast, prices for eggs, dairy products, and pork are expected to decline in 2026.
Egg prices, one of the most volatile food categories, are projected to fall sharply — down 22.2% from 2025 — as U.S. egg production has rebounded since mid-2025 and is expected to keep recovering this year. Meanwhile, USDA expects prices for “other foods,” a broad category with a 12.6% weight in the food price index, to rise 3.1%, making it another key contributor to overall food inflation.
Why restaurants matter more this time
Restaurant prices carry a 41.6% relative importance in the overall food price index, compared with 58.4% for groceries, meaning the sharp increase in dining-out costs more than offsets the slower pace of grocery inflation. USDA notes that while the projected 4.6% increase in restaurant prices is well below the 7%-plus spikes seen in 2022 and 2023, it still signals renewed pressure on foodservice operators and consumers.
Bottom Line: USDA’s latest revisions show food price inflation cooling at the grocery store but re-accelerating at restaurants, leaving consumers facing higher overall food costs in 2026 than in 2025. The tempered rise in grocery prices offers some relief, but the combination of strong meat prices and rising dining-out costs means food inflation remains firmly above pre-pandemic norms.
