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Restaurants Poised to Raise Prices

(October 28, 2011)—Restaurants are poised to raise prices as Americans become accustomed to more expensive food at grocery stores.

U.S. consumers paid 2.6 percent more at eateries in September than last year, while food prices at supermarkets were 6.2 percent higher, according to the Bureau of Labor Statistics’ monthly consumer-price index. Inflation for eating at home has accelerated faster than dining out during the past year, reaching its widest gap since 1990 last month.

Restaurants monitor this differential because they don’t want to appear too aggressive with menu pricing relative to the cost of food at home, said Jeffrey Bernstein, an analyst with Barclays Capital in New York. This gives companies “more credibility” in adjusting prices, particularly as commodity inflation puts pressure on margins, he said.

“If people go to the supermarket and see that the core items they’re purchasing are on the rise, then they are less likely to be surprised if restaurants are raising prices as well,” Bernstein said.

Read more on Bloomberg.com: http://www.bloomberg.com/news/2011-10-28/restaurants-lift-prices-to-catch-food-at-home-inflation-retail.html 

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