Fast-food menu price inflation is accelerating as deflation hits grocers

Fast food prices

Prices at fast food chains seem to be accelerating again. | Image: Shutterstock.

Inflation at fast-food restaurants accelerated last month, even as prices fell at grocery stores, according to new federal data released Wednesday.

Prices at limited-service restaurants rose 0.4% in April, slightly higher than the 0.3% increase in March, but continued an accelerating pattern — fast food prices rose 0.1% in February.

Over the past year, fast food prices rose 4.8% in April, a modest slowdown compared to March. However, monthly inflation numbers suggest that limited-service restaurants are raising prices more aggressively again, likely impacted by increased labor costs in California.

Prices also accelerated at full-service restaurants, rising 0.3% in April after rising 0.2% the previous month. Over the course of the year, full-service restaurants raised prices by 3.4%.

Overall, prices for food away from home, which includes food served at schools, hospitals and other places as well as restaurants, rose 0.3% last month and 4.1% over the past year.

But the increase in prices comes as grocery stores reduce prices. Food prices at home fell 0.2% last month and rose just 1.1% over the past year.

This gap may exacerbate concerns about the value of restaurants across the industry, preventing people from dining out more often. Industry activity decreased As the year began, challenges faced a wide range of restaurant chains, from McDonald’s to Olive Garden.

This traffic problem is also forcing more chains to change their marketing strategy to focus more on value and price points. McDonald’s has shifted towards more value-oriented marketing, Including the $5 National Meal Offer It largely matches offerings from competitors like Wendy’s and Taco Bell.

But concerns about traffic also keep costs inflating, especially with regard to labor.

California, which accounts for about 15% of the U.S. restaurant industry, in April began requiring fast-food chain restaurants in the state to pay $20 an hour, a requirement that immediately increased pay rates at those locations by 25%.

Many limited-service restaurants, including McDonald’s operators, Subway franchisees and chains like Chipotle Mexican Grill, have increased their prices accordingly.

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