Financing

Restaurants continue raising prices faster than grocers

Menu price inflation slowed at fast-food restaurants last month. But prices throughout the industry continue to increase faster than at supermarkets.
Menu inflation
Menu inflation slowed

Fast-food restaurants slowed their pricing roll in May, but not enough to match the non-existent inflation at grocery stores.

Limited-service restaurants raised prices 0.2% month over month in May, according to federal data released on Wednesday. Over the past year, they’ve raised prices 4.5%.

Price hikes at full-service restaurants accelerated, however, rising 0.4% in May and 3.5% over the past year. Overall, food-away-from-home prices were up 0.4% in May and 4% over the past year.

In each case, the restaurants are increasing their prices faster than grocers. Food at home prices were flat last month—though that, in fact, was an acceleration over the deflation of April.

Over the past year, grocers have raised prices just 1%.

The pricing gap between restaurants and grocers has been blamed on traffic challenges in the restaurant industry that has panicked executives, particularly among fast-food chains that are watching lower-income diners cut back on their visits.

Executives from Walmart have argued that their lower prices are attracting customers away from restaurants, looking for a lower-priced meal.

McDonald’s CEO Chris Kempczinski signaled the issue in February when he said that “eating at home has become much more affordable.”

That has largely ignited a value war in the industry as operators look to get traffic back into their doors.

It might be slowing price increases at limited-service restaurants. Inflation had been accelerating earlier in the year, perhaps in part due to preparation for the $20 wage in California. That wage, a 25% increase in the state’s minimum, has led to steep price hikes, even at low-priced stalwarts like In-N-Out.

Overall inflation was flat in May, a signal that runaway inflation is easing. Prices rose 3.3% over the past year.

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