CPI Up for 3rd Month – Restaurant CPI Flat

Sticky Inflation is Starting to Look Endemic

We entered 2024 with 5.2% CPI and after a meaningful drop over the first half of the year, the trend reversed as we entered fall. At 2.9% it certainly represents good progress, but it’s far from the Fed’s target and moving farther away. The markets appear encouraged by moderating “Core” inflation, which was driven primarily by shelter cost. Restaurant CPI remained unchanged across segments at 3.6% with Limited Service outpacing Full Service slightly at 3.7% and Food at Home ticked up.

As we enter a new year and a change of leadership in Washington, the overall economy has positive momentum with strong job growth and strong asset markets, but CPI remains a threat. If go-forward inflation settles in the 3% range instead of 2% that might be palatable, but if the 3 month upward trend continues it will create consumer frustration. The increase in Food at Home (grocery) to 1.7% is more likely to a drag on consumers than it is to cause any shift to restaurants since restaurants are still increase prices at double the rate. With CPI far from ‘under control’ policy decisions for the new administration and the Federal Reserve will be like threading a needle.

Read the original post and subscribe for updates here.