Restaurant Price Inflation – Have we turned the corner?

The Bureau of Labor Statistics (bls.gov) inflation report released today shows that Full-Service Restaurant (FSR) prices ticked up slightly to 9.0% year-over-year (YOY) vs 8.8 % in September. This is not a significant change, as FSR inflation has remained consistently within the range of 8.8% to 9.0% YOY for the past 6 months. Limited-Service Restaurant (LSR) prices, up 7.1%, were the same in October as September, and have remained consistent between 7.0% and 7.4% since March, and equal to October last year.

On the whole, this represents reasonably good news for consumers and restaurateurs. Barring any unforeseen or unexpected developments, these trends indicate that lower restaurant inflation rates may be on the horizon, particularly as we lap prior year acceleration and peaks. At Personica, we continue to expect that restaurant price inflation will remain elevated in 2023, but at levels below the prior year.

Overall inflation numbers are showing signs of improvement. Today’s report shows that year-over-year (YOY) U.S. inflation rates have declined 50 bps in the past month, (+7.7% Oct vs +8.2% Sept), and Food at Home (FAH), a measure of grocery prices price inflation at 12.4% in October, is down from 13.0% in September, and 13.5% in August. This de-escalation is the first time since May of 2021 where YOY FAH price inflation has declined in two consecutive months. Nonetheless, Energy (+17.6% YOY) remains volatile, and with heating oil season upon us, consumer spending is likely to continue to be pressured.

While we are nowhere near back to “normal,” some modest directional change is evident in these reports, and should be well considered as you develop your restaurant pricing plans for 2023.

Ted Babcock, Vice President, Menu & Pricing Analytics
tbabcock@personica.com