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Restaurant menu prices continue to rise as labor costs soar

Consumers who go to restaurants are finding higher prices these days as operators charge more for their menu items in a bid to offset rising labor costs.

Menu prices, or out-of-home food prices, rose 0.6% between April and May, according to the latest Consumer Price Index data from the US Department of Labor.

Restaurant prices are up 4% year on year.

The menu price inflation rate was lower than the overall inflation rate, which was 5% last month on an annual basis. This is the largest 12-month increase since August 2008.

Menu prices have risen since last summer when consumers started flocking to fast food drive-thrus and ordering delivery and operators paid higher prices for labor and charged consumers accordingly.

But for most of that time, it was the limited-service sector that led the charge, as demand for these meals and consumers’ willingness to pay for them drove higher fees.

Still, prices at full-service restaurants rose 4.1% a year in May, according to the Labor Department, which said it was the highest annual growth rate for this sector since October. 2018.

The numbers suggest full-service restaurants are raising their fees as operators face higher labor costs when filling vacancies to meet growing demand. Sales at full-service restaurants have largely rebounded in the past three months as consumers, with cash to spend, filled seats at independent restaurants and casual dining concepts.

That said, fast food restaurants continue to drive prices up. Restricted-service restaurants have increased their prices by 6.1% over the past year.

Annual menu price inflation, full service c. limited service

Source: United States Bureau of Labor Statistics

Labor is largely responsible for the price increase – in contrast, the less labor intensive grocery sector increased its prices by only 0.7% during the last year. About a third of restaurant revenue is spent on wages and benefits, making them more aggressive in raising prices when wages rise.

“It feels like the industry is going to have to react,” Chipotle chief financial officer Jack Hartung told investors this week after the company admitted it had recently hiked prices by 4% to pay fees. higher labor costs. “It feels like the industry is now going to have to do something similar or play some kind of catch-up. Otherwise you’ll just lose the staff game.

At the same time, it’s not just work. Restaurants are facing shortages of certain supplies for everything from chicken to sauces, which in some cases is driving up prices.

Some of the other inflationary sectors could also put pressure on industrial prices in the near future, notably energy, which could lead to higher prices for raw materials and utilities. The energy index has risen 28.5% over the past 12 months. The price of gasoline has increased by 56.2% over the past year.

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