Menu Prices

The Consumer Price Index (CPI) rose by 0.4% in December, up from 0.3% in November, marking the fastest monthly increase since March. On an annual basis, consumer prices climbed 2.9%, compared to 2.7% in November, reaching the highest year-over-year rate since July.

Food prices saw a 0.3% increase in December, slightly lower than November's 0.4% growth. Meanwhile, energy costs surged by 2.6%—the largest monthly gain since August 2023—driven by a notable 4.4% rise in gasoline prices. Excluding the more volatile food and energy categories, core consumer prices edged up 0.2% in December, following four consecutive months of 0.3% growth. Notable contributors to the increase in core inflation included used cars and trucks (+1.2%), new vehicles (+0.5%), and transportation services (+0.5%).

On a year-over-year basis, core inflation eased to 3.2% in December, the lowest rate since July, after holding steady at 3.3% for the preceding four months. This data presents a mixed narrative: while overall (headline) inflation has moderated significantly over the past two years, core inflation remains stubbornly high, showing limited downward movement. Core inflation averaged 3.3% year-over-year in the latter half of 2024, down from an average of 3.6% in the first half of the year.

The Federal Open Market Committee (FOMC) is expected to leave the federal funds rate unchanged at its January 28–29 meeting, following rate cuts at the last three sessions. However, with core inflation still above the Fed's 2% target, any adjustments in 2025 are expected to be gradual. Uncertainties surrounding the economic outlook persist, and the Fed is likely to adopt a cautious, data-driven approach to further rate cuts. Nevertheless, two rate reductions remain possible this year, contingent on inflation and economic growth trends.

Menu prices rose 3.6% over the last 12 months

Menu prices saw a modest 0.3% increase in December, maintaining the same pace for the second consecutive month. Over the past year, the Consumer Price Index (CPI) for dining out, also known as Food Away from Home, rose by 3.6%, slightly lower than the 3.8% year-over-year growth recorded in November. This represents the slowest annual increase since August 2020.

Overall, menu inflation has eased considerably in 2024, dropping from a 5.2% year-over-year rise in December 2023 and even further from the peak 8.8% increase reached in March 2023.

In contrast, grocery prices edged up by 0.1% in December after a similar decline in November. Over the last year, the CPI for Food at Home rose by 1.6%, up from a 1.1% increase in November and marking a 13-month high. Despite this uptick, grocery price inflation has significantly slowed compared to its peak of 13.5% year-over-year in August 2022

In the food-away-from-home sector, limited-service menu prices rose 0.4% in December, the most since April, while fullservice menu prices increased by a more modest 0.2% for the month. Year-over-year, fullservice menu prices have grown by 3.6% since last December, while limited-service prices increased by 3.7% year-over-year for the second straight month, remaining the slowest pace of growth since the onset of the pandemic.

At their peak, fullservice menu prices surged by 9.0% year-over-year multiple times in 2022, whereas limited-service prices reached a high of 8.2% in April 2023.

In the broader food-away-from-home sector, prices for food from vending machines and mobile vendors climbed 0.2% in December, marking a three-month high. Menu prices at employee sites and schools ticked up by 0.1% during the month, recovering slightly after a sharp 0.9% drop in November.

On a year-over-year basis, prices for food at employee sites and schools increased by 3.7%, 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 of just 0.6% over the past year.

Regionally, the West saw the highest menu price growth, with a 4.3% year-over-year increase. In contrast, the Midwest experienced the slowest growth at 3.1% year-over-year. The Northeast and South reported more moderate increases, with menu prices rising 3.5% and 3.4% year-over-year, respectively.