Inflation ‘becoming less of a problem’ for restaurantsInflation ‘becoming less of a problem’ for restaurants

Inflation rose 0.5% in January, exceeding expectations and putting the annual inflation rate at 3%, up from 2.9% in December and 2.7% in November. According to federal data released Wednesday morning, much of this uptick was driven by shelter, energy, gasoline, and food costs.

The overall index for food rose 0.4% in January, with food at home rising 0.5% and food away from home increasing 0.2%.

Year-over-year, food prices are up 2.5%, with food at home up 1.9% and food away from home up 3.4%. For the food-away-from-home category, limited-service meals rose 0.3% over the month and the index for full-service meals rose 0.1%.

Egg prices accounted for about two-thirds of the total monthly food-at-home increase, jumping 15.2% month-over-month and marking the single biggest increase in egg prices since June 2015. Because of this trend, January marked the smallest gap between grocery and restaurant price increases since April 2023, according to Kalinowski Equity Research.

Still, the 150-basis-point gap in favor of grocery stores far outpaces the 23-year historical 70-basis-point gap. In a note, Kalinowski Equity Research president and chief executive officer Mark Kalinowski said this larger-than-average disparity is one reason the restaurant industry’s same-store sales performance struggled in 2024.

Related:New York City, Massachusetts restaurants report sales, profit drops

“Will this gap hamper H1 2025 restaurant industry same-store sales as well? Maybe so, although the gap shrinking by quite a bit over the last few months may provide some reason that the gap won’t be so bad from the restaurant industry’s perspective as 2025 unfolds,” he said.

Kalinowski adds that the 3.4% year-over-year increase for menu pricing marks the first month in nearly four years in which the gain is equal to or less than the category’s 23-year historical average of 3.4%.

“Inflation is gradually becoming less of a problem for the U.S. restaurant industry as a whole,” he said.

Several restaurant companies have reported easing inflation during their recent quarterly earnings calls, including McDonald’s, which noted pricing has continued to moderate because input costs have come down. Brinker reported that food and beverage costs for its most recent quarter improved by 20 basis points year-over-year.

Contact Alicia Kelso at [email protected]