Menu price inflation remained elevated in July

Food away from home inflation was 7.6% last month and prices held steady at both full-service and limited-service restaurants. Overall, consumer prices were flat in the month.
restaurant menu prices
Restaurant menu prices increased 7.6% in July, near a 40-year high. / Photograph: Shutterstock.

The dramatic runup in restaurant menu prices continued in July, though there are signs that inflation may have peaked.

Food away from home prices rose 0.7% in July, the U.S. Bureau of Labor Statistics said on Wednesday. That is a slowdown from the 0.9% inflation reported in June, though it remains at the higher-than-average pace the industry has set for much of this year.

Those prices are up 7.6% over the past 12 months. That remains near a 40-year high in the metric, set last month

Inflation at full-service restaurants rose 0.6% in July and are up 8.9% over the past year, remaining near historic highs established earlier this year. Prices at limited-service restaurants rose 0.8%, a slight acceleration, and are up 7.2% over the past 12 months.

Retail food prices, on the other hand, show little sign of a slowdown. They rose 1.3% in July, up from 1% the previous month. They are up 13.1% over the past year as consumers pay dramatically high prices for everything from eggs to breakfast cereal.

That was also the highest rate in 43 years.

Still, in general, consumer prices were flat during the month, giving investors hope that the inflationary run the economy has endured is showing some signs of abating, thanks at least in part to falling gas prices.

Stocks soared in the process and nearly every publicly traded restaurant company was up. Jack in the Box, Red Robin and Outback Steakhouse owner Bloomin’ Brands were all up more than 8%.

The wide gap in price inflation between grocers and restaurants could provide some backstop for industry sales going forward.

Grocery price inflation is 570 basis points higher than menu price inflation, a gap that often steers traffic toward restaurants (the opposite works, too). With gas prices now coming down, that could provide some hope for operators that a consumer reaction many of them are fearing will not be as severe as some might have thought.

Restaurant executives’ comments on the state of the economy on their consumer has generally been mixed, though there is broad-based agreement that lower-income consumers have been pulling back. Regardless, there is also agreement that the impact, at least thus far, has not been as pronounced as other factors, such as a return to a more normalized rate of dining.

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