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Restaurant food prices rise in September

Restaurant food prices rise in September

Trend counters deflation in grocery prices, Bureau of Labor Statistics says

Restaurants continued to increase prices in September even as grocers kept prices steady, according to new federal data, continuing a trend in which the inflationary gap between the two major purveyors of food to consumers has widened into a gulf.
Prices for food away from home rose 0.2 percent from August to September, according to the latest consumer price index data from the U.S. Bureau of Labor Statistics.
Over the past year, restaurant prices have risen 2.4 percent. By contrast, prices for food eaten at home were flat in September from August, but down 2.2 percent over the past year. That’s a 4.6-percentage-point gap in pricing between restaurants and grocers.
Grocery prices have declined on a year-over-year basis for 10 straight months — surpassing the last sustained period of grocery price deflation in 2009, when the country was mired in its worst economic downturn in 80 years.
Grocers have lowered prices to reflect lower commodity costs. Restaurants, meanwhile, have maintained cost increases to match rising labor costs and higher lease rates.
The gap in pricing between restaurants and grocers has been blamed for weakening same-store sales in the restaurant industry. Several indexes and surveys tracking industry same-store sales have noted a sharp downward trend affecting all segments this year, including quick-service restaurants and casual dining concepts.
Many analysts believe the pricing gap is a primary reason. Consumers, lured by lower grocery prices, are opting to eat at home more often and eat at restaurants less often.
In a research note Tuesday, Shane Higgins, an analyst with Deutsche Bank, said a weighted Producer Price Index showed slight improvement in September, suggesting a low point in the deflationary cycle plaguing food retailers was approaching.
The overall food CPI was unchanged from August, helped by a 0.2-increase in prices for food away from home.
NRN senior finance editor Jonathan Maze contributed to this report.

Updated: Oct. 18 2016  This story has been updated with additional information.

Contact Jon Springer at [email protected]
Follow him on Twitter at @SN_springer

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