Restaurant prices are outpacing grocery prices for the first time in 18 months, according to data from the Bureau of Labor Statistics (BLS). Food away from home prices grew 8.8 percent in March on a 12-month basis, while food at home prices were up 8.4 percent. 

Limited-service menu prices increased 7.9 percent year-over-year and were up 0.5 percent from February. It was the biggest spike since early 2022, when prices jumped 8 percent. Full-service menu prices were more in line with recent trends, growing 8 percent year-over-year and 0.7 percent on a month-to-month basis. 

Meanwhile, the Consumer Price Index for food at home saw its smallest year-over-year increase since January 2022. The 8.4 percent figure came on the heels of 12 consecutive months of double-digit gains, which peaked at 13.5 percent last summer. Grocery prices decreased 0.3 percent between February and March, marking the first month-to-month decline in two and a half years. 

Price gains at grocery stores have surpassed price gains at restaurants since inflation started accelerating in mid-2021, but the gap has narrowed in recent months. The CPI for food at home was up 11.3 percent in January on a 12-month basis, while the CPI for food away from home was up 8.2 percent. That 3.1 percentage-point difference shrank to 1.8 in February, when food at home prices grew 10.2 percent and food away from home prices grew 8.4 percent. 

According to Mark Kalinowski, president of Kalinowski Equity Research, March’s 8.8 percent figure was the highest year-over-year increase for restaurant pricing in over two decades. 

“The good news is that most commodity-cost pressures appear to be easing,” he wrote in a report on Wednesday. “That said, restaurants may need to do some ‘catch-up’ pricing, so we expect this number to remain quite high by historical standards for the next 3-6 months, at least.”

While the pricing advantage that restaurants enjoyed appears to be over, it’s worth noting that much of the increase in food away from home prices was driven by the end of free school lunch programs that were introduced during the pandemic. The CPI for food at employee sites and schools increased 131 percent between March 2022 and March 2023, while the price index for food at elementary and secondary schools soared 296 percent. 

“This component had been significantly dampened for much of 2021 and 2022, which BLS attributed to widespread free school lunch programs,” Bruce Grindy, chief economist at the National Restaurant Association, wrote in an analysis on Wednesday. “As these programs expired, many students went from paying nothing to paying regular prices for school lunches. As a result, this price index rose sharply in recent months, which is putting upward pressure on the overall food-away-from-home index.”

That impact will continue until the end of the year, after the base effects of the free school lunch programs run their course, he added.

Overall consumer prices grew 5 percent in March on a year-over-year basis. It was the ninth consecutive month of decelerating growth and the smallest 12-month increase since May 2021. 

Consumer Trends, Finance, Growth, Story