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An analyst expects the gap between restaurant and supermarket prices to shrink noticeably in 2024.

October price index unchanged as restaurants outpace supermarkets

8th consecutive monthly gap growth compares with no such monthly increase in all of 2022, analyst Mark Kalinowski notes

The Consumer Price Index for all urban consumers was unchanged in October on a seasonally adjusted basis, after increasing 0.4% in September, the U.S. Bureau of Labor Statistics reported Tuesday. Over the last 12 months, the all-items index increased 3.2% before seasonal adjustment.

However, price increases at restaurants outpaced those at supermarkets in October, the data showed.

Mark Kalinowski, principal at Kalinowski Equity Research, noted that the latest Consumer Price Index showed an increase in prices for food at home (grocery stores and supermarkets) of 2.1% in October (sequentially down by 30 basis points from September’s 2.4% increase).

Kalinowski said the increase for food at home compared with prices for food-away-from-home (restaurants) that increased by 5.4% year-over-year in October (sequentially down by 60 basis points from September’s increase of 6%).

“This marks the eighth month in a row for which restaurant pricing is outpacing grocery/supermarket pricing, following no such months during all of 2022,” Kalinowski said in a note.

The gap between grocery inflation and restaurant inflation contracted slightly on a sequential basis, to 330 basis points in favor of groceries.

“This is actually the smallest gap in favor of grocery stores in the last four months,” Kalinowski said. “We take that as a sign that the gap likely reached its high point in September 2023 (360 basis points). We do not expect the gap to meaningfully widen from here. In fact, by early 2024, we expect the gap to start noticeably shrinking.”

The 20-year (2003-2022) historical average is a 60 basis-point gap, Kalinowski noted, “so October 2023 is the seventh month in well over a year in which the gap is in favor of grocery stores, and simultaneously, larger than the 20-year historical average gap.”

Restaurant industry same-store sales have shown signs of slowing in the first half of fourth quarter, the analyst said, “and it looks likely that Q4 2023 will post the lowest same-store sales of any quarter during 2023.”

In Tuesday Bureau of Labor Statistics report for October, the food index rose 0.3%after rising 0.2% in each of the last three months.

“The index for food at home increased 0.3% over the month, after rising 0.1% in September,” the bureau said in a press release. “Four of the six major grocery store food group indexes increased over the month. The index for meats, poultry, fish, and eggs rose 0.7% in October as the index for beef increased 1.2% and the index for pork rose 1.3%. The other food-at-home index increased 0.3% over the month, as did the dairy and related products index. The index for cereals and bakery products rose 0.2% in October, after falling 0.4% in September.

The index for nonalcoholic beverages decreased 0.1% in October, after being unchanged in September. The fruits and vegetables index was unchanged over the month, as it was in September.

The food-away-from-home index rose 0.4% in October, as it did in September. The index for limited-service meals increased 0.5% and the index for full-service meals rose 0.3% over the month.

The index for food away from home rose 5.4% over the last year. The index for limited-service meals rose 6.2% over the last 12 months, and the index for full-service meals rose 4.3% over the same period.

The Consumer Price Index rose 3.7% in August and increased the same 3.7% in September.

Contact Ron Ruggless at [email protected]

Follow him on X/Twitter: @RonRuggless

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