Restaurant and Grocery Price Discrepancy Increased in August

Limited-Service and Full-Service Restaurant Prices Rise

Limited-service restaurant prices have surged by 4.3% over the past year, while full-service prices have seen a 3.8% increase. According to the latest Consumer Price Index (CPI) data released by the Bureau of Labor Statistics on Wednesday morning, menu prices rose by 0.3% in August, slightly higher than the 0.2% increase in July. Year-over-year, food-away-from-home prices have risen by 4%, compared to 4.1% in July.

Menu Price Inflation Slows Compared to Previous Months

Although the increase in August was marginally higher, it remains lower than the 0.4% hikes seen in both May and June. This aligns with the menu inflation rates observed in March and April, indicating a relative stabilization in restaurant price growth.

Grocery Prices Remain Stable as Restaurant Prices Continue to Climb

In contrast, food-at-home prices, representing grocery or supermarket costs, remained unchanged in August after a slight 0.1% rise in July. Over the past 12 months, grocery prices have increased by just 0.9%, down from 1.1% in July. This marks the 17th consecutive month where restaurant prices have outpaced grocery prices, as highlighted by Kalinowski Equity Research.

Widening Gap Between Restaurant and Grocery Inflation

Mark Kalinowski, President and CEO of Kalinowski Equity Research, pointed out that the gap between grocery and restaurant inflation widened by 10 basis points in August, now standing at 310 basis points in favor of grocery prices. This is significantly higher than the 22-year historical average of a 60-basis-point gap. The current disparity is nearing the 2016 full-year gap of 390 basis points, which resulted in one of the lowest same-store sales performances for the restaurant industry, second only to the pandemic period.

Impact of Price Discrepancy on Consumer Behavior

The growing gap between restaurant and grocery prices has been cited by several industry executives as a contributing factor to the recent decline in restaurant traffic. New research from Circana reveals a growing trend towards at-home dining, with 86% of eating occasions now sourced from home.

“Dining out now costs four times more than eating at home, prompting many to reduce restaurant visits,” said David Portalatin, senior vice president and industry advisor at Circana. “Consumers are spending more time at home and adapting to new daily routines, resulting in a shift in meal patterns.”

Menu Prices Outpace Overall Inflation

Despite the moderation in restaurant price growth, menu prices continue to surpass the overall Consumer Price Index, which stood at 2.5% in August, down 0.4% from July and marking its lowest level since early 2021.