Trend in US grocery, restaurant inflation on the cusp of changing

Few prices are as visible to Americans as the ones they encounter at the grocery store or drive-through window, which is why two years of rapid food inflation have been a major drag for US households and the Biden administration.

Shoppers have only slowly regained confidence in the state of the economy as they pay more to fill up their carts, and President Joe Biden has made a habit of shaming food companies – even filming a Super Bowl Sunday video criticising snack producers for their “rip-off” prices.

But now, the trend in grocery and restaurant inflation appears to be on the cusp of changing.

After months of rapid increase, the cost of food at home climbed at a notably slower clip in January. And from packaged food providers to restaurant chains, companies across the food business are reporting that they are no longer raising prices as steeply.

In some cases, that is because consumers are finally pushing back against price increases after years of spending through them.

In others, it is because the prices that companies pay for inputs such as packaging and labour are no longer rising as sharply.

Even if food inflation cools, it does not mean that your grocery or restaurant bill will get smaller: It just means it will stop climbing so quickly.

Most companies are planning smaller price increases rather than outright price cuts. Still, when it comes to whether rapid jumps in grocery and restaurant prices are behind us, what executives are telling investors offers some reason for hope.

Some, but not all, consumers are saying no

Executives have found in recent months that they can raise prices only so high before consumers cut back.

Soft drink and snack maker PepsiCo had raised prices by double-digit percentages for seven straight quarters, and while that streak ended at the close of 2023, PepsiCo still raised prices by 9 per cent in the final months of the year.

But all those price jumps on soft drinks and chips have started to bite. The company recently posted a surprise drop in sales.