Menu prices increased 0.4% month-over-month in August, according to the latest Consumer Price Index data from the Bureau of Labor Statistics, released Sept. 15. While a couple years ago, we would be remarking on how aggressively restaurant operators were boosting prices, these days it’s a significant one-month slowdown in the pace of the increases. In July, menu prices rose 0.8% and June’s increases was 0.7%. For the 12 months since last August, menu prices are up 4.7%. This is the greatest increase since 2008, just as the Great Recession was taking hold, and food and many other commodity prices-including metals, were spiking

Grocery-store prices also rose 0.4% in August and are running 3% higher than a year ago. A lot of the gain at grocery stores has come in just the past two months. Prices rose 0.7% in July and 0.8% in June. Price increases were very moderate earlier in the year. And you’ll recall grocery-store food prices surged for the first few months of the pandemic as supply issues affected stocks.

The overall CPI rose 5.3% for the 12 months ended August. Prices rose 0.3% versus July. The month-over-month increase in July was 0.5% and that in June was 0.9%. So, the price gains are slowing. Among the categories that saw price declines were air fares. Hotel room rates also fell, as the Delta variant of Covid slowed travel. BLS: CPI; WSJ: Inflation Cooled in August, A Bit

The menu-price increases continue to be driven by limited-service operators. With August gains, their menu prices have risen a remarkable 6.9% during the past 12 months. But full-service operators are beginning to catch up with a 4.9% increase for that period. Labor- and food-cost increases are behind the gains, of course, but intense consumer demand allows operators to boost prices. While the Delta variant surge has tamped down that demand, consumers, thankfully, really want to get back to using restaurants.

Market Trends/Economic Trends, Operator Trends

While many economists and most governors at the Federal Reserve still believe the current intense inflation is a transitory phenomenon, little sign of a slowdown in price increases was apparent from the August Producer Price Index, released by the Bureau of Labor Statistics Sept. 10. Among commodities most important to foodservice and the E&S markets, wholesale food and producer metals prices continued an upward trajectory.

The 2.1% decline in food prices in July at the “final demand” wholesale level, after six straight months of increases, appears to be an anomaly. Prices rebounded with a 2.9% gain in August, led by a whopping 14.7% jump in beef prices and a 6% rise in chicken prices.

Prices for nearly all food categories rose in August. Only fresh eggs and fresh and processed fruits and vegetable prices were stable. Prices at the earlier processed and unprocessed stages of food production all posted strong gains in August, so more final demand increases loom on the immediate horizon.

As MetalMiner data we previously reported foresaw, the Producer Price indices for industrial metals also remained historically very high in August, though a couple categories showed minor slackening in the pace of increase. Raw sheet steel prices, however, maintained their upwards trajectory, as the accompanying chart shows. Prices for the major grades of carbon steels have more than tripled during the past 18 months.

The PPI for commercial refrigerators rose 1.3% in August from July and prices are 12.5% higher than a year ago. Prices for other foodservice and commercial equipment and appliance also remained high, though electric cooking equipment posted a small dip in prices in August. BLS: PPI; MetalMiner: Monthly Price Reports 

The higher food prices are driven by multiple factors: drought and high heat in the West and other US agricultural areas, short beef and other protein supplies as herds are rebuilt, intense demand for chicken wings and other commodities as foodservice rebounds from the pandemic, labor shortages at every stage of growing, production and distribution. It will likely take many more months before prices begin to soften.

Our friend Mike Posternak, mentioned above, discovered new data on prices for several commercial equipment and supplies categories in the Producer Price Index. They had likely been lurking in the PPI detail for years without our being aware. We’ll start reporting this data regularly going forward. It’s very cool and useful.

There is a reason I have been reporting the rising prices of industrial metals for a very long time, thanks to MetalMiner, the Wall Street Journal and other data sources. The metals are significant cost components of foodservice E&S. There is a lot of carbon steel used in E&S, to use this issue’s example.

Market Trends/Commodity & E&S Pricing Trends

One of the major themes of our annual E&S Market Forecast, presented virtually Sept. 14 and 15, was the continuing and perhaps even worsening problem of global logistics and freight. David Wasserman, president of SGP, told the audience that every stage of the movement of goods—ranging from the shortage and availability of shipping containers, port bottlenecks worldwide amid Covid port shutdowns in Asia to the availability of truck drivers at ports and for long-haul and local delivery—is making the movement of goods very difficult.

You can see David’s full presentation by buying the forecast (see above). But I also refer you to this recent article in The Economist The Economist: Perfect Storm For Container Shipping and the accompanying chart. And also, see this article in Eater, which details how product shortages (and labor shortages) are affecting restaurant operators. Eater: Restaurants Struggle With Product And Labor Shortages

We’ve been writing for some time that restarting the world economy will take months or years. The pandemic has also aggravated existing problems like the shortage of long-haul truck drivers that was already looming because of the retirement of Baby Boomers. In many ways, trucking is facing the same labor issues as restaurants: People aren’t taking the jobs because they are difficult, don’t pay much, and are difficult on family life.

Market Trends/Economic Trends Operator Trends, Commodity & E&S Pricing Trends

The surge of cases and hospitalizations from the Covid Delta variant suppressed some on-premise dining in August, judging from the retail sales data for “food services (sic) and drinking places” released by the Bureau of Labor Statistics Sept. 16. Sales were flat, 0%, during the month according to the “Advance” preliminary data. They actually rose $22 million on a seasonally adjusted basis, another record for a month. But they fell in unadjusted terms by more than $2 billion. Sales are 31.9% higher on a seasonally adjusted basis than last August, during the pandemic.

Overall retail sales rose 0.7% month-over-month. That number was sucked down by a drop in auto sales. Without autos, whose sales are stymied by semiconductor chip and other component shortages, overall retail sales rose 1.8%. Grocery-store sales rose 2.1%. Census Bureau: Retail Sales 08-21; WSJ: Consumers Kept Spending In Aug. Despite Delta

NRA attributed the sluggish sales directly to a drop in consumers’ willingness to go out to eat out (see NRA’s monthly report and accompanying chart. NRA: August Sales Plateau As Consumers Get Nervous; RB: Restaurant Sales Flat Even As Delta Surges

It’s a pattern we’ve seen throughout the pandemic: Covid surges and consumers pull back from going out to dine in restaurants. They also pull back from other venues such as casinos, theme parks and the like. But what’s interesting this time is the damage seems limited. This is apparent not only in the federal retail sales data, but in data from chain sales and traffic tracking service such as Black Box. Black Box: Restaurant Performance Pulse

Maybe it’s the number of vaccinated folks or that most restaurants remain careful with mask mandates, distancing and the like. And it’s still warm enough to dine outside in most parts of the country, if it’s not too hot or smoky.

But any slowdown, especially for full-service operators, is a problem. The Independent Restaurant Coalition released a study Sept. 9 that found more than 82% of members still fear they may close without further federal restaurant relief. And last week, leading chef/owners lobbied Congress to refill relief funding. IRC: Updates; Rest. Dive: IRC Survey Reveals Operators Still Vulnerable To Closure

Market Trends/Operator Trends; Regulations

Among news of the foodservice equipment and supplies market we’ve seen in the past week:

   --Middleby Corp., Elgin, Ill., has named Katie Cox vp of business development. Cox will be responsible for managing new business development with large chain accounts. Before spending almost nine years at Hatco’s Ovention division in a number of roles, Cox spent six years at Yum! Brands’ Pizza Hut as a senior equipment and innovation engineer.

“As our customers explore updated solutions to best fit their new business environment, Katie’s deep experience will be an asset,” said Middleby Chief Commercial Officer Steve Spittle. (From a company release.)

   --Multi-branch foodservice E&S dealer Bargreen Ellingson has expanded with a new branch in Boseman, Mont. The new facility includes both a warehouse and showroom; it opened Sept. 1. The company said the new branch “is a strategic move that will allow Bargreen Ellingson the opportunity to offer more robust services via a physical presence in this rapidly growing marketplace.” The dealer already has outposts in Billings and Missoula, Mont. BE is based in Tacoma, Wash., and is one of largest dealers in the country.

Pat Kelling, the company’s Montana GM, said, “We are thrilled to be growing our footprint even more in Montana.” He added the area was previously serviced from Billings. “This expansion allows us to make local deliveries faster and offer greater support both on contract projects and through an increase in territory salespeople.” (From a company release.) Bargreen

   --Clearwater, Fla.-based consulting firm TBCI Design has named Marisa Mangani as senior vp of special projects. Earlier in her career, Mangani moved back and forth between kitchen and menu concept design and executive chef roles. She comes to TBCI Design after spending more than 27 years at consultant Fishman & Associates in Venice, Fla. (From a company release.) TBCI Design

   --Polar Leasing, the Ft. Wayne, Ind., operation that leases Polar King outdoor refrigeration solutions, has named David Kelty inside sales representative. Kelty comes from MedPro Group, where he also held an inside sales position. (From a company release.) Polar Leasing  

   --Henny Penny, Eaton, Ohio, has donated more than $300,000 in equipment to a new culinary school, the Shular Institute, based in Tucker, Ga., near Atlanta. According to a company release, the Institute, founded by Certified Master Chef Daryl Shular, “seeks to provide culinary education more in line with real-world foodservice needs.” (From a company release.)

Blue Chip Economic Indicators reported the consensus forecasts from the 50 major economic forecasting groups it surveys each month have slipped slightly for both 2021 and 2022, but they remain robust. As it affects foodservice, the forecasts for real growth of disposable personal income and consumer spending both fell, but the consensus forecast for real consumer spending growth next year remains historically high at 3.7%. Blue Chip Economic Indicators (Blue Chip requires a subscription.)

On another broad economic note, the Wall Street Journal, hardly a bastion of progressive economics, ran a piece by its Chief Economics Commentator Greg Ip that opines that the world’s major economies, led by the US, handled policy responses to the pandemic well. WSJ: How US Nailed Its Covid Response

The Blue Chip economists cut this year’s GDP forecast in part because of supply constraints. US automakers, for example, can’t build vehicles fast enough to fill demand.

As for the Ip article, I can’t remember the last time I read a “news” article in that newspaper, which I’ve been closely reading for more than 40 years, that so openly applauded deficit spending. Ip often contributes to and founded the Wall Street Journal’s Real Time Economics newsletter, which I cite regularly.

Market Trends/Economic Trends

President Biden announcement Sept. 9 that companies with more than 100 employees will need to mandate either vaccination or provide regular Covid testing of employees has a lot of operators asking how the new regulations, to be put in place through the federal Occupational Health & Safety Administration, will affect them. Here are a couple articles that go over the knowns and unknowns. NRN: Q&A On Vaccine Mandates; RB: Restaurants Grapple With Vaccine Mandates

Of course, the mandate also applies to other commercial foodservice operators. Many operators in noncommercial segments are also dealing with institutional mandates. Larger E&S employers at all levels of production and the channels are also affected. These overviews answer many of their questions, too.

Regulations; Market Trends/Operator Trends

We discuss the severe labor shortages affecting restaurants and hotels quite often. But it is important to remember foodservice operators across the industry’s many segments are also struggling to find workers. This New York Times article looked at the problems finding workers in schools, including their foodservice operations. NYT: Schools Seeing Shortage Of Support Workers

We’ve seen articles in publications such as FoodService Director and Food Management that cover the labor shortages across the noncommercial segments.

Market Trends/Noncommercial Operator Trends

The National Restaurant Assn.’s annual Kitchen Innovations Awards program, run as part of the NRA Show, has opened for entries. Ground-breaking foodservice equipment technologies across the spectrum are eligible for this annual program. Details can be found here: NRA Show: Kitchen Innovations Awards Program Open For Submissions

Submissions are judged by a panel of leading kitchen designers, chain restaurant E&S specialists and noncommercial operators. The program is managed by my friend, former partner and co-founder of Foodservice Equipment Reports Brian Ward. It’s a great program that really has promoted technological advances including energy-efficiency and water savings, labor savings, food and foodservice operations safety. We look forward to seeing next year’s recipients.

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