Gap Between Grocery And Menu Prices Continue Growing While Wholesale Food Prices Keep Falling

One factor that many analysts believe is contributing to falling restaurant traffic and same-store sales is the divergent trends in grocery store and restaurant menu prices. In August, that gap reached its widest spread in nearly seven years, according to the Bureau of Labor Statistics and the  National Restaurant Association. And with wholesale food prices falling again in August, this trend is likely to continue.

According to data from the Bureau of Labor Statistics’ monthly Consumer Price Index, food-at-home prices fell 0.2% again in August, its fifth decline in the six months since March, while menu prices rose 0.2% for the sixth consecutive month. As a result, menu prices have risen 2.8% in the past 12 months, the 25^th consecutive month the 12-month gain has been 2.5% or higher. Grocery store prices are down 1.9% for the past 12 months, leaving the spread between food-at-home and food-away-from-home price trends at nearly five points.

Meanwhile, data from the BLS Producer Price Index showed a continuing decline in wholesale food prices at every level of demand. NRA said the average decline in wholesale food prices was 1.2% in August, following a 0.6% decline in July. Average wholesale food prices were down 6.5% from a year ago, the largest 12-month decline since the depths of the Great Recession. Beef and veal prices continued to fall in August, down 2.7%, and are running 22% lower than this time last year. NRA said beef prices are on track for their first annual decline in seven years. The decline in wholesale food prices, combined with menu price increases, has helped operators maintain margins even in a time of rising labor costs. This has, in turn, helped support the continuing strong trends in capital spending by restaurateurs.