Menu prices
Menu-price growth continues to slow, while overall inflation remains sticky
The Consumer Price Index rose 3.5% over the past 12 months, up from 3.2% year-over-year in February and the strongest rate since September. At the same time, core inflation (which excludes food and energy) increased 3.8% year-over-year in March, the same pace as in February, remaining the slowest pace since May 2021.
Overall, these data highlight a mixed picture for consumer inflation. On the positive side, core inflation continues to moderate, albeit not as fast as expected. Yet, the uptick in costs in the latest data shows how stubborn prices can be, even with progress over the past year.
For its part, the Federal Open Market Committee is expected to keep interest rates unchanged at its upcoming April 30–May 1 meeting, but with inflation remaining stronger than preferred, the Federal Reserve is likely to wait until there are clearer signs of pricing progress before it starts the process of normalizing rates. This could still occur at the June 11–12 FOMC meeting, but policymakers might want to wait for the July 30–31 meeting (or later) to cut interest rates, waiting for incoming data to reflect sufficient headway on the inflation front. In addition, stronger economic growth also provides a challenge for rate cuts.
Menu prices rose 4.2% during the last 12 months
In contrast to the uptick in the overall CPI, growth in menu prices continued to slow in March. The Consumer Price Index for Food Away from Home increased 4.2% between March 2023 and March 2024. That represented the 12th consecutive month of decelerating growth and the smallest 12-month increase since June 2021.
Meanwhile, growth in grocery prices ticked slightly higher in March. The Consumer Price Index for Food at Home rose 1.2% between March 2023 and March 2024 – up from a 12-month gain of 1.0% in February. The recent gains were well below the decades-high growth rates of 2022 – including a peak 12-month increase of 13.5% in August 2022.
Within the food-away-from-home sector, limited-service menu prices outpaced the fullservice segment in recent months, although growth rates in both price indices are well below their recent highs. Prices for limited-service meals and snacks increased 5.0% between March 2023 and March 2024. That was the smallest 12-month increase since August 2020, after peaking at 8.2% in April 2023.
Fullservice menu prices rose 3.2% between March 2023 and March 2024. That represented the smallest 12-month gain since March 2021, after topping out at 9.0% during several months of 2022.
Elsewhere in the food-away-from-home sector, the price index for food from vending machines and mobile vendors increased 6.2% between March 2023 and March 2024. That marked the smallest 12-month increase since March 2022, slowing significantly from the double-digit percent gains posted during 2023.
The price index for food at employee sites and schools increased 3.7% between March 2023 and March 2024. This component had been significantly dampened for much of 2021 and 2022, which BLS attributed to widespread free school lunch programs. As these programs expired, many students went from paying nothing to paying regular prices for school lunches. That resulted in sharp year-over-year increases in this price index from mid-2022 to mid-2023. These base effects are now running their course, which will result in a normalization of this price index as well as its outsized impact on the overall Consumer Price Index for Food Away from Home.
On a regional level, the Northeast (4.6%), West (4.4%) and South (4.2%) regions saw the strongest menu price growth between March 2023 and March 2024. Average menu prices in the Midwest region increased at a comparatively modest 3.4% rate during the last 12 months.
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