Grocery-restaurant price gap narrows in February, Consumer Price Index indicates

The Consumer Price Index for February indicated a narrowing of the gap between grocery and restaurant prices, the Bureau of Labor Statistics reported Tuesday.

The index for food at home, mostly groceries, rose 10.2% over the last 12 months, and the index for food away from home, mostly restaurants, rose 8.4% over the past year, the bureau said in its latest report.

The index for full-service meals rose 8% over the last 12 months, and the index for limited-service meals rose 7.2% over the same period.

“With grocery prices continuing to rise at a faster rate than restaurant prices, and with commodity-cost inflation remaining a huge challenge – coupled with what has been so far fairly manageable consumer resistance to menu price increases,” said Mark Kalinowski of Kalinowski Equity Research said in a Tuesday note, “we expect that U.S. restaurants will continue to raise menu prices at a meaningfully higher-than-historical-average rate during the first half of 2023, if not for longer.”

Consumer Price Index data showed the gap between groceries and restaurants narrowed in February from January, when food at home rose 11.3% and food-away from home was up 8.2% in the past year.

“The 1.8 percentage-point difference between food-at-home’s 10.2% and food-away-from-home’s 8.4% nevertheless remains one of the widest gaps in 40-plus years,” Kalinowski added. “However, on a monthly basis, it is 370 basis points less than the 5.5 percentage-point gap witnessed for July 2022 and August 2022. We expect the gap to continue to narrow over the next six to 12 months, meaning that the current advantage for restaurants is likely to dissipate in the not-so-distant future.”

Noah Hayes, general manager for the U.S. and Canada at Deliverect, a global software-as-a-service company for online food-delivery management, said in a statement:

“Inflation is dominating the conversation in every industry and according to the Bureau of Labor Statistics, consumer prices rose 6% for the year ending in February,” Hayes said. “With the food index increasing 0.4% over the month and 9.5% year over year, consumers have felt the impact.”

Consumers “undoubtedly” are increasing their consciousness of spending, he said, adding that restaurants can automate tasks and optimize menu pricing.

“While finding ways to boost profits and reduce costs will be imperative for the bottom line, restaurants should continue offering competitive wages to recruit and retain staff,” Hayes said. “A happy team and operationally savvy kitchen is the winning recipe when it comes to offering a high standard of service to customers.”

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