August CPI: Groceries Didn’t Move Last Month. Takeout Did.

Dairy is the only grocery aisle cheaper than it was a year ago. Flour is not. Here is what the new inflation numbers do to the cost of a pizza.

By Zach Miller

What the August report said

The headline index rose 0.4 percent in August and sits 3.4 percent above a year ago, according to the BLS release published this morning. Gasoline did most of the monthly lifting. Food contributed almost nothing, rising 0.1 percent.

That flat food number hides the interesting part. CBS News reported that the 3.4 percent annual rate came in above the 3.3 percent economists polled by FactSet had expected, with energy driving more than a third of the monthly increase. Groceries, meanwhile, did not move at all, while eating out kept its steady climb.

Dairy is the odd one out

Dairy fell 0.3 percent over the year. Every other grocery group the BLS breaks out rose: nonalcoholic beverages 3.7 percent, fruits and vegetables 3.2 percent, cereals and bakery 2.6 percent, other food at home 2.4 percent, meat and eggs 1.1 percent.

Worth flagging the wrinkle: dairy actually ticked up 0.3 percent within August itself. The annual decline is the story, not a fresh drop.

That squares with the cash cheese market. I wrote in late August about the CME block market slipping under $1.50 a pound, and it has stayed down there since. USDA’s Dairy Market News put 40-pound blocks at $1.4650 and barrels at $1.5325 on September 4.

The catch, and I keep returning to this, is that the cheddar block price is not a mozzarella price. There is no CME contract for mozzarella, and the two have been drifting apart. USDA’s own weekly dairy report notes that ‘demand for mozzarella cheese is very strong in Europe,’ which is pulling spot loads to a premium. So a falling dairy index does not guarantee a cheaper bag of low-moisture mozzarella at your store, and it is still worth being deliberate about which mozzarella you actually buy.

Flour went the other way

Cereals and bakery products are up 2.6 percent over the year, more than double the pace of meat. That is the flour side of the pizza, and it fits the supply picture. The 23 percent drop in this year’s US wheat crop takes months to reach retail shelves, so the August reading reflects last season more than this one.

Sauce sits somewhere between the two. Fruits and vegetables rose 3.2 percent for the year, and California’s processing tomato harvest came in 10 percent short of last year, though the paste stockpile is deep enough to cushion a lot of that.

What USDA expects for the rest of the year

USDA’s Economic Research Service publishes a forward look, and its August 25 update forecasts all food prices rising 3.0 percent in 2026, with grocery prices up 2.5 percent and restaurant prices up 3.6 percent. Dairy is forecast to finish the year unchanged. For 2027 it pencils in 2.4 percent, with prediction intervals wide enough to drive a delivery car through.

The National Restaurant Association, which tracks the same BLS series, had menu prices up 3.4 percent year over year through July against 2.7 percent for groceries, and describes that gap as narrowing. August did not narrow it.

Why this matters for home cooks

A homemade pizza is roughly flour, water, salt, yeast, canned tomato and cheese. Two of those six line items are the cheapest components on the board right now, and cheese is usually the single most expensive thing on the pan. When the dairy index is the only one in negative territory, the economics of a Friday-night bake quietly improve.

Meanwhile the alternative got more expensive again. Limited-service meals rose 3.2 percent over the year, which is where carryout and delivery pizza live. That is the third straight time this year the two lines have moved in opposite directions, and it is the practical version of the math behind making it yourself.

What to watch next

Two things. The September CPI lands in mid-October and will show whether the dairy decline holds or whether August’s 0.3 percent monthly uptick was the start of a turn. The cash cheese market is the faster signal: blocks trading back above the barrel price would point to a firmer autumn for the most expensive ingredient in the recipe.

Cheese demand usually firms up heading into the holidays, and football season pulls pizza volume with it. For now the window is open rather than closing.