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The cost of eating Part II: Restaurant meals

The cost of eating Part II: Restaurant meals

Posted on: 9/26/2017 | Author: ATB Financial's Economics + Research Team

Yesterday The Owl looked at how prices of groceries purchased in stores have risen by nearly twice the rate of overall consumer prices in Alberta. Yet as we know, Albertans also love to eat at restaurants, pubs and fast food outlets. Here the news for food lovers is even worse.

The light orange line in the graph below shows the trend in prices of groceries purchased from stores, while the dark orange line is food purchased in restaurants. With the index of prices in August 2007 set at 100, the index for restaurant meals rose to 128.9 last month—an increase of nearly 30 per cent in 10 years. Food purchased from stores is up 27 per cent, while the all-items consumer price index is up 15 per cent.

The trend in price increases of restaurant meals has been much smoother than grocery prices because constantly adjusting prices on menus would be both costly and inconvenient. As well, consumers would likely be confused and bewildered if every time they sat down at their favourite restaurant, the menu prices had changed. Far less confusion occurs when prices rise or fall in the grocery aisles.

For restaurant owners, the challenge has been to keep menu price increases reasonable while managing rising expenses. Costs for labour, energy, insurance and other inputs have all risen steadily over the last few years—much faster than menu prices. So, while food lovers and diners may be unhappy about rising menu prices, they should remember that profit margins at many of their favourite restaurants are likely being strained.

Trends in consumer prices, graph

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