Wholesale food prices jumped 1.4% last month after largely remaining flat or falling for much of the year, according to new federal data on Thursday, reigniting concerns that another bout of inflation could hamper the economy in the short term.
The producer price index increased 0.9% month-over-month in July, and 3.3% for the year, far higher than had been expected, according to U.S. Bureau of Labor Statistics.
Food costs were particularly high and are now up 4.2% over the past year. Wholesale food prices had been either flat or down each of the previous four months.
Tariffs may have something to do with it. The cost of fresh and dry vegetables, many of which are imported, jumped 38.9%, the largest spike among any product category last month.
The cost of beef increased 4.6% last month and is up nearly 10% over the past year. Coffee prices rose 1.1% last month but are up more than 29% over the past year. Egg prices, meanwhile, have yo-yoed all year and were up 7.3% last month after declining 19.8% in June.
The report sent stocks down on Thursday as investors were concerned that the spike would send inflation higher. Most restaurant stocks were down on Thursday outside of Brinker International, Rave Restaurant Group and Yum Brands.
Wholesale prices drive up the cost of doing business and can lead to higher consumer prices.
Restaurant chains are generally less susceptible to food prices than grocers but coupled with higher labor costs they can force menu price increases. Many restaurant chains right now are struggling with weak traffic amid consumer frustration over higher prices.
As it is, many chains have adjusted their marketing to address some of those cost concerns. With beef prices higher, many chains are introducing chicken products. Wholesale chicken prices have been flat over the past year.
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