Data Shows Restaurant Inflation Might Finally Be Slowing Down

On Wednesday, news sites all around proclaimed that the age of inflation is drawing to a close. Vox, for example, reported that prices on Wednesday were 8.5% higher than in the previous year. The good news is that in June the difference was 9.1%. While prices aren't expected to drop back to pre-pandemic levels, Jason Furman, an economics professor at Harvard University and former Obama administration economic adviser, still sees a reasonably bright future. The average wage, he explains, is higher than the rate of inflation. He said, "If wages keep growing quickly and price growth slows, people would be more able to afford things than they were before all of this." Whether the average person is experiencing this is another story.

The restaurant industry can also hope that inflation will stop hurting small restaurants. According to QSR, menu prices are only 7.6% higher than they were last year, as opposed to 8.9% we saw in June. Quick service and casual restaurant chains are still hopeful for a lucrative future though. Applebees noted that they saw an increase in visits during inflation because customers could not afford to visit more expensive restaurants but still desired to eat out. Similarly, McDonald's intends to profit from the price gap between restaurant menus and grocery bills. So, inflation is easing in some restaurants, but it's probably still here for a large portion of the public.

While widespread cheering over the potential end of inflation was occurring, MarketWatch urged caution. The argument is that when you cut out food and energy prices, which are most at the mercy of happenstance, the consumer price index was still 5.9% in June and could climb higher before the year is out. The issue is that once a company raises a price, it's hard to convince it to lower it again.

Moreover, when you consider that food prices are a separate issue, it becomes clear that the cost of food can still rise, fall, or remain at inflationary heights. Michael Gapen, head of US economics at Bank of America Global Research, described to CNN the Fed's view of food and energy costs: "Food and energy are influenced by global commodity prices in a way that tells them, 'Hey, these items aren't really directly under your control.'" The issue, then, is that there is more at play in the fluctuation of food prices that includes, supply chain breakdowns, the invasion of Ukraine, and climate change. At least, however, there is a little reprieve.