Financing

Restaurants continued to raise prices in May

Limited-service prices increased 8% annually last month, even as retail grocery price inflation slowed further.
menu price inflation
Restaurant menu prices increased 8.3% last month, according to new federal data. / Photo: Shutterstock.

Restaurants continued raising prices at a more aggressive rate than their retail counterparts, largely reversing a pricing gap between the two industries over the past year, according to new federal data released on Tuesday.

Inflation for food away from home increased 0.5% in May, according to data from the U.S. Bureau of Labor Statistics, and 8.3% over the past year.

Limited-service restaurants, meanwhile, increased prices 0.5% in May and 8% over the past year. Full-service restaurant prices are up 6.8% annually, according to the data.

Meanwhile, grocers and other retail food establishments continued their slow pace of inflation in recent months. Food at home prices increased 0.1%. Over the past year, those prices are up 5.8%.

Overall, inflation increased 0.1% in May and 4% year over year. Easing inflation could keep the U.S. Federal Reserve from raising interest rates further as it shifts focus to prevent a recession.

The continuing increase in prices at restaurants is an indication that operators are still paying higher prices for labor and are confident in their ability to take price even amid concerns of the impact higher prices are having on consumers.

Restaurants are raising prices at a rate that’s 2.5 percentage points higher than retail, the largest such gap since 2021. Last year, as commodity costs took off, grocers increased prices at a rate that at one point exceeded 5 percentage points, which helped maintain restaurant sales even in the face of historically high prices.

But grocers have been easing their prices over the past several months while restaurants have maintained some pricing aggressiveness.

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