INFLATION HITS RESTAURANT TRAFFIC
E Earlier this year, we brought up an argument that rising food prices could give restaurants an edge because the price gap between dining out and cooking at home had become narrower (Kwok, 2022). It did not take long for the inflation to finally hit the restaurant traffic. The Consumer Price Index (CPI) increased by 8.3% from 2021 (Cox, 2022). Not only was it higher than Dow Jones estimation at 8.1%, but it remained close to the highest level since the summer of 1982. After removing food and energy prices, the core CPI still rose 6.2%. This still exceeded an anticipated level of 6%. Because of record-high inflation, workers’ real earnings dropped 2.6% year-to-year despite average hourly earnings increasing by 5.5%. The unexpected high inflation in April also cast doubts on the market about whether the inflation “peak” in March had really hit the ceiling. INFLATION IN APRIL ALMOST HIT THE HIGHEST LEVEL IN 40 YEARS
RESTAURANT TRAFFIC, ESPECIALLY DRIVE-THRU, DROPPED SIGNIFICANTLY IN APRIL Data has shown that restaurant traffic in April dropped 9.4% from the 2021 level (Kelso, 2022). Notably, the continuously rising and record-breaking gas prices likely have substantially discouraged people from driving. Drive- thru traffic for restaurants was down by over 13%, whereas dine-in patrons recorded an increase of 2.4%. Because many restaurants had raised menu prices to offset the inflation of “everything,” restaurant sales did not get hit as much as the store traffic. Nonetheless, it seems that consumers had reached a threshold that they would cut restaurant visits and spending. It is uncertain that less foot traffic in restaurants would help ease the industry’s labor shortage challenge. Drops in traffic for sure worried many restaurant owners and operators. How concerned are you about the inflation’s effects on restaurant traffic and sales? n
LINCHI KWOK, PH.D.
CONTRIBUTING WRITER linchikwok.net REFERENCES Cox, J. (2022, May 11). Inflation barreled ahead at 8.3% in April a year ago, remaining near 40-year highs. CNBC News. Available on https://www.cnbc.com/2022/05/11/cpi-april-2022.html Kelso, A. (2022, May 12). Inflation is starting to take a toll on restaurant traffic. Forbes Magazine. Available on https://www.forbes.com/sites/aliciakelso/2022/05/12/inflation-is-starting-to-take-a-toll-on-restaurant-traffic/ Kwok, L. (2022, February/March). Can inflation be a good thing? Hospitality News Magazine, 2(2), p. 14.
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