The Consumer Price Index fell by 0.1% in June, marking the first time inflation levels have dropped since 2020. The inflation level is now 3% higher year-over-year, marking the CPI’s smallest annual increase in a 12-month period and inching closer toward the Fed’s target of 2%.
Much of this cooling was driven by home and rent prices, however, while food prices remained relatively stubborn. According to new data from the U.S. Bureau of Labor Statistics released Thursday morning, the food index rose by 0.2% in June after a 0.1% increase in May. Food at home was up by 0.1% on the month, while the food-away-from-home index increased by 0.4%, matching May’s increase.
Comparatively, the food-at-home index increased 1.1% over the last 12 months, while restaurant prices rose 4.1% in the same timeframe. While both indexes rose in June, restaurant prices have now outpaced grocery prices for 16 straight months, with the gap remaining at 300 basis points. According to Kalinowski Equity Research, the historical average is a 60-basis-point gap.
In June, the inflation index looked very different for full-service restaurants versus quick-service restaurants; full-service menu prices rose 0.6%, while limited-service meals increased 0.2%. Full-service prices accelerated from a 0.4% increase in May and a 0.3% increase in April. Limited-service meals matched the 0.2% increase from May and slowed from a 0.4% acceleration in April, despite a bigger impact from California’s minimum wage increase. This disparity suggests the QSR segment’s aggressive shift to value offerings is having an impact. That said, over the last 12 months, full-service meals are up 3.9%, while limited-service menu prices are up 4.3%.
Mark Kalinowski, CEO and president of Kalinowski Equity Research, cautions that the persistent gap between restaurant and grocery prices is likely impacting restaurant industry same-store sales as increasingly discerning consumers choose to cook more at home. During 2016, for instance, the gap between the two categories widened to 390 basis points, generating the second-lowest same-store sales performance in the last seven years, behind only the pandemic year.
“We continue to fully expect full-year 2024 same-store sales growth to be meaningfully lower than full-year 2023 same-store sales growth,” Kalinowski wrote in a note. “Full-year 2024 same-store sales growth will likely be the lowest – excluding pandemic-impacted 2020 – since 2018 …”
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