Restaurant costs are increasing faster than grocery prices for the foremost time since inflation surged

April 13, 2023: Initially, since inflation started accelerating in mid-2021, restaurant prices outpaced grocery costs on a 12-month basis, the Labor Department stated.

It’s a blow to the business industry, which has seen lagging traffic numbers as budget-conscious consumers cut back. For months, restaurant CEOs such as Cheesecake Factory’s Matthew Clark and Wendy’s Todd Penegor have been touting their meals as a relative bargain compared to eating at home, based on consumer price index data.

March food prices rose 8.5% over the previous 12 months, fueled by the increase in the cost of eating away in restaurants, which was up 8.8%. For the third consecutive report, the cost of food away from home rose 0.6% monthly.

The Chief Economist of the National Restaurant Association, Bruce Grindy, attributed the surge to the surge in school food prices as free lunch programs instituted during the Covid pandemic expired.

“As a result, this price index has increased sharply in recent months, which is putting increased pressure on the total food-away-from-home index,” he wrote in a blog post-Wednesday, adding that it’s expected to keep distorting the total food-away-from-home index until the fourth quarter.

The food price at home is up 8.4% in the last 12 months and fell 0.3% from February. The cost of eggs fell 10.9% in March from the previous month, while the fruits and vegetable index decreased by 1.3%.

For months, grocers have pressured food and beverage manufacturers to keep prices down as shoppers agree with sticker shock, trading to private-label brands and putting fewer items in their shopping carts. Some suppliers are listening as their volume shrinks: Conagra Brands and PepsiCo have stated they won’t increase prices any more this year, while Old Bay seasoning CEO of McCormick said it’s trying to hike prices but faces pushback from retailers.

As inflation cools, the consumer price index has risen 5% over the last 12 months. That was below anticipations for a 5.1% increase. Likewise, many restaurant firms have also stated that inflation is moderating, although food, labour and construction costs remain elevated.