In fact it did not take long for inflation to finally hit restaurant traffic as well.
Inflation almost hit a 40-year High
In April, the Consumer Price Index (CPI) increased by 8.3% from 2021 levels (Cox, 2022). Not only was it higher than Dow Jones estimated 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 exceeded an anticipated level of 6%. Because of record-high inflation, workers’ real earnings have dropped 2.6% year-to-year despite average hourly earnings increasing by 5.5%. The unexpected high inflation in April cast doubts on the market about whether the inflation “peak” in March had really hit the ceiling. So what does that mean for the future restaurant industry?
Restaurant traffic, especially drive-thru, Down significantly in April
Data has shown that restaurant traffic in April dropped 9.4% from 2021 level (Kelso, 2022). Notably, the continually rising and record-breaking gas prices likely have discouraged people from driving. Drive-thru traffic for restaurants was down by over 13%, whereas dine-in patrons increased by 2.4%.
Because many restaurants had raised menu prices to offset the inflation of “everything,” restaurant sales did not get hit as much as store traffic. Nonetheless, it seems that consumers had reached a threshold, and would begin cutting restaurant visits and non-essential spending. It is uncertain whether less foot traffic in restaurants will help ease the industry’s labor shortage challenge. Drops in traffic have certainly worried many restaurant owners and operators.
How concerned are you about inflation’s effects on restaurant traffic and sales?
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.
