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Menu prices continued to cool in November, though not as fast as grocery/supermarket prices.

Grocery prices continue to decelerate faster than menu prices

November marked the eighth consecutive month of decelerating menu prices.

The Consumer Price Index for November showed a 3.1% increase year-over-year, down a tick from the 3.2% pace in October, according to a Bureau of Labor Statistics report released Tuesday morning.

Food prices, both at home and at restaurants, decelerated on the month. Food-at-home prices, including grocery stores and supermarkets, rose by 1.7% month-over-month (versus 2.1% in October) and 2.9% year-over-year and continued to trend down at a faster rate than restaurants. The pace of inflation for the grocery/supermarket category has now fallen below the Federal Reserve’s 2% target rate.

Menu prices, meanwhile, were up 5.3% year-over-year – versus 5.4% in October – and rose 0.4% in November, consistent with its month-over-month increases in October and September. Full-service meals rose 0.5%, while the index for limited-service meals increased 0.4% over the month. On the year, limited-service meals increased 6%, while the index for full-service meals rose 4.3% year-over-year. November marked the eighth consecutive month of decelerating menu prices.

Despite the widening gap between the grocery/supermarket category and restaurants, and some erosion in restaurant traffic, Mark Kalinowski, president and CEO of Kalinowski Equity Research, is confident that restaurants will continue to take share from grocery. This year, for instance, restaurants gained 150 basis points of market share from the grocery sector, and he expects another 50-to-100 basis points next year, barring a recession.

“Consumers may complain a lot about higher prices, but their actions speak louder than words,” he said during a recent interview. “Americans have shown they want restaurants to be a big part of their lives.”  

That said, he notes the consumer is becoming more guarded and expects “meaningfully less pricing” taken in 2024.

“Cost inflation is coming down to more normalized levels. But that also means if you’re going to grow your business and margins, there’s not a quick fix,” he said. “Better positioned, better run concepts will be at an advantage next year.”

Overall, November’s CPI showed a slight uptick across categories, but nothing beyond expectations. The Federal Reserve is expected to meet Wednesday to discuss any potential changes in interest rates given the backdrop of this new inflationary data.

Contact Alicia Kelso at [email protected]

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