The Bureau of Labor Statistics (bls.gov) Consumer Inflation Report released today shows that Full-Service Restaurant (FSR) prices ticked down markedly to 8.2% year-over-year (YOY) vs 9.0% in November. This is a significant change, as FSR inflation has remained consistently within the range of 8.7% to 9.0% YOY for the past 8 months. Limited-Service Restaurant (LSR) prices, up 6.6%, dipped slightly from November’s 6.7%, but continue on a soft downward trend versus the ~8% peak from Nov-Feb year ago.
On the whole, this result is reasonably good news for restaurant consumers. These improving trends are consistent with our internal forecasts as we believe that deceleration is likely to continue across the year, particularly as we lap prior year acceleration and peaks over the coming months. While restaurant price inflation will remain elevated in comparison to historical norms in 2023, LSR and FSR inflation rates near 4-5% by year end are possible, barring unexpected developments.
Consumer wage growth (+4.6% YOY) along with easing gas prices will continue to offset a portion of the pressure on household budgets, although housing inflation and high levels of credit card debt are likely to keep demand for food away from home somewhat muted. The Food at Home (FAH) CPI index, a measure of grocery prices, price inflation at 11.8% in December which continues a downward trend from the 13.5% in August, also easing household pressure from the summer peak.
Be advised that there is broad regional variation in these national numbers that will impact smaller brands differently depending on their geographic footprint. And while we are nowhere near back to normal, the directional change evident in these reports should be factored into your menu and pricing plans for 2023 and beyond.
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