Grocery inflation cools while restaurant prices continue to rise
Grocery inflation cools while restaurant prices continue to rise
The price of food has been one of the driving forces behind inflation over the last couple of years. In March, however, food prices overall stayed pretty flat.
The price of groceries dropped slightly from the month before for the first time in almost two years. The price of eating at restaurants, though, went up. For a while, grocery prices had risen notably faster than restaurant prices. But not anymore. Why?
Grocery prices started shooting up almost as soon as the pandemic began. First, meat and dairy. Eventually, most everything else.
“Some of it was supply chain congestion … and, of course, energy costs,” said William Masters at the Friedman School of Nutrition at Tufts University. He also said supply chains are mostly flowing again and energy costs have dropped.
“And so we’re seeing prices come back down. Egg prices down, dairy prices down, fruits and vegetable prices down,” he said.
However, restaurant prices are up because when people go out to eat, they’re paying for more than just food.
“We’re also paying for services,” said David Ortega at Michigan State University. “We have wages, there’s rent, utilities that add up on top of the actual cost of the food itself.”
Rising wages are the main reason most restaurants are increasing their prices. Hudson Riehle at the National Restaurant Association said about half of restaurants reported that they’re still struggling to find and keep staff, and most have hiked wages to try.
“If you look at hourly earnings in the restaurant industry, the first year of the pandemic, that was roughly about … a 3% increase,” he said. “Last year, that was a 9% increase. This year [it’s] running about 6.9%.”
Many restaurant owners hesitated to pass those increased costs along to customers, but, Riehle said, they eventually had to. Sucharita Kodali at research company Forrester said it’s unlikely they’ll be able to do that for long because eating out is not a necessity.
“If consumers are finding that the prices are completely out of whack with what they may be able to get otherwise, like at the grocery store, they’ll probably pretty quickly retreat,” she said.
But that’s not happening yet, since Americans have been going out to eat more than ever lately.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
