The Consumer Price Index, which measures inflation, didn’t budge in May after rising 0.3% in April, according to Bureau of Labor Statistics data released Wednesday. The food index rose 0.1% after being unchanged in April, driven by restaurant prices.
The food-away-from-home index ticked up 0.4%, from 0.3% in both April and May, and 0.1% in February. Just January (0.5%) was higher. Perhaps surprisingly, full-service meals rose 0.4%, from a 0.3% increase in April. Conversely, limited-service meals cooled in May, at 0.2% versus a 0.4% acceleration in April, despite a bigger impact from California’s minimum wage increase. This likely indicates that an aggressive push into value offerings is cooling things down a bit.
Since Q1, several restaurant brands – both limited-service and full-service – have become more aggressive with value offerings and bundles, including McDonald’s, Burger King, Arby’s, Wendy's, Jack in the Box, and more.
Food-away-from-home prices are 4% higher throughout the past 12 months, compared to 3.3% for the general index. The index for limited-service meals is 4.5% higher over the last 12 months, while the index for full-service meals rose 3.5% during the same period.
Meanwhile, food-at-home prices were flat in May and dipping 0.2% in April. Food-away-from-home prices are 1% higher throughout the past 12 months. The consistent gap between grocery/supermarket prices and restaurant prices is driving more consumers to eat their meals at home, as indicated by several anecdotes from Q1 earnings calls. These anecdotes are backed by data from Revenue Management Solutions finding that restaurant traffic in Q1 fell by 3.5%. The move toward at-home eating is also evidenced by Walmart CFO John David Rainey’s comments in May, noting that the pricing gap between grocery and restaurants has been a boon to his company.
“It’s roughly 4.3 times more expensive to eat out than it is to eat at home,” he told CNBC. “And that’s benefiting our business.”
Contact Alicia Kelso at [email protected]
