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National Restaurant Association - Economist’s Notebook: Wholesale food prices on pace to post their strongest gain in three decades

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Economist’s Notebook: Wholesale food prices on pace to post their strongest gain in three decades

In his latest commentary, the National Restaurant Association's Chief Economist Bruce Grindy analyzes the latest trends in food and menu prices.  Wholesale food prices are on pace to register their strongest gain in three decades, while menu and grocery store prices are following different paths. 

Wholesale food prices continued to march higher in September, according to new data from the Bureau of Labor Statistics.  Average wholesale food prices rose 0.6 percent in September, their fourth consecutive monthly increase and 13th gain out of the last 15 months. 

As a result of the steady gains over the last several months, wholesale food prices are on pace to post their strongest annual increase in more than three decades.  On a year-to-date basis through September, average wholesale food prices increased 7.8 percent.  If this trend continues, it would represent the strongest gain since 1980, when prices rose 8.1 percent.

With the exception of a 3.8 percent decline in 2009, restaurant operators battled a steady upward trend in food prices in recent years.  If the current trend holds, 2011 will mark the third time in the last five years that average wholesale food prices rose at least 7.6 percent.  In addition, the overall five year increase will be in excess of 26 percent. 

While the rising food costs are impacting both grocery stores and restaurants, it is the grocers that are passing more along to customers in recent months.  In the 12 months ending September 2011, grocery store prices jumped 6.3 percent, their strongest 12-month gain in nearly three years. 

In contrast, menu prices rose a comparatively modest 2.6 percent during the same 12-month period, less than half of the grocery store gain and more than a full percentage-point below the overall inflation rate of 3.9 percent.

Annual Growth in Average Wholesale Food Prices

Wholesale Bar Chart.gifSource: Bureau of Labor Statistics   *Year-to-date through September

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