Menu Prices
The Consumer Price Index (CPI) rose by 0.5% in January, up from 0.4% in December and the fastest monthly increase since August 2023. This was stronger than the consensus estimates of a 0.3% increase in consumer inflation that was expected. On an annual basis, consumer prices have climbed 3.0% over the past 12 months, compared to 2.9% in December, reaching the highest year-over-year rate since June.
Food prices climbed 0.4% in January, marking the biggest monthly increase since February 2023. The surge was driven by a 0.5% rise in grocery costs, the steepest jump since October 2022, using seasonally adjusted data. Menu prices increased by 0.2% in contrast (see more detail on that below). Meanwhile, energy costs rose 1.1% in January, extending the 2.4% increase seen in December, with gasoline prices up 1.9% for the month.
Excluding the more volatile food and energy categories, core consumer prices edged up 0.4% in January, the fastest pace in 10 months. Notable contributors to the increase in core inflation included used cars and trucks (+2.2%), transportation services (+1.8%), medical care commodities (+1.2%) and shelter (+0.4%).
Year-over-year, core inflation edged up to 3.3% in January from 3.2% in December, highlighting persistent pricing pressures. Notably, the current rate matches the nine-month average, indicating that inflation’s moderation has stalled. This presents a significant challenge for the Federal Reserve, which was already in a wait-and-see posture on future monetary policy actions as it waits to see upcoming data. The Federal Open Market Committee is unlikely at this point to reduce short-term rates at its upcoming March 18–19 meeting.
Grocery prices jumped as menu prices rose more modestly
Menu prices edged up 0.2% in January, slowing from 0.3% in the previous two months. Over the past year, the Consumer Price Index (CPI) for dining out—also known as Food Away from Home—rose 3.4%, down from 3.6% in December, marking the slowest annual increase since July 2020. Menu inflation has cooled significantly since early last year, dropping from a 5.1% year-over-year rise in January 2024 and even further from its March 2023 peak of 8.8%.
In contrast, grocery prices surged 0.8% on a non-seasonally adjusted basis, the sharpest increase in two years. (Seasonally adjusted, the gain was 0.5%, as noted earlier.) Over the past year, the CPI for Food at Home rose 1.9%, the fastest annual pace since October 2023. Despite these recent gains, grocery inflation has cooled significantly from its peak of 13.5% year-over-year in August 2022.
In the food-away-from-home sector, limited-service menu prices rose 0.3% in January, extending the 0.3% and 0.4% gains recorded in November and December, respectively. Meanwhile, full-service menu prices inched up just 0.1%, marking the slowest monthly increase in six months.
Year-over-year, both full-service and limited-service menu prices climbed 3.3%, the slowest annual gains in roughly four years. At their peaks, full-service menu prices surged 9.0% year-over-year multiple times in 2022, while limited-service prices hit an 8.2% high in April 2023.
In the broader food-away-from-home sector, prices for food from vending machines and mobile vendors soared 1.1% in January. Menu prices at employee sites and schools ticked down by 0.1% during the month, falling for the second time in the past three months.
On a year-over-year basis, prices for food at employee sites and schools increased by 3.8%, while other food purchased away from home saw a 4.3% rise. In contrast, food from vending machines and mobile vendors recorded a much smaller annual increase, rising 2.2% over the past year.
Regionally, the West saw the highest menu price growth, with a 3.9% year-over-year increase. In contrast, the Midwest experienced the slowest growth at 2.8% year-over-year. The Northeast and South reported more moderate increases, with menu prices rising 3.4% and 3.2% year-over-year, respectively.
