Gas Prices Plummet, Consumer Food and Menu Price Increases Are Restrained

The expected seasonal decline in gasoline prices has finally kicked in, following the unexpected run-up of prices this late summer. The average national price for a gallon of regular gas has plummeted nearly 13 cents in the last week alone, and at $3.548 a gallon, is nearly 24 cents lower than a month ago. Declines in gasoline prices usually benefit foodservice, as declines add to consumers’ disposable income, especially for those with lower household incomes.

Meanwhile, the latest reading on consumer prices from the Bureau of Labor Statistics shows that the expected increase in food prices related to this summer’s severe drought have not yet reached grocery stores or foodservice operators. Food-at-home prices were flat in September, while menu prices rose 0.2% for the month. For the past 12 months, prices at grocery stores have risen only 0.8% while menu prices are up 2.8%. The big run-ups in gasoline and other energy prices in August and September pushed the overall Consumer Price Index up 0.6% for the second consecutive month. But the core index, less energy and food, rose only 0.1% and is only 2% higher than a year ago.

Wholesale food prices rose 0.6% in September, according to the National Restaurant Association, which balances changes at all three levels of production detailed in the BLS’s Producer Price Index. Nearly everyone expects dramatic increases in food costs over the next 18 months, with those for most proteins forecast to increase by as much as 15%. The increases will almost certainly put pressure on most foodservice operators’ costs and profit margins next year.