By Chris Elliott, Senior Economist (Oct. 19/16) Seven out of 10 restaurants operators reported higher average food costs in the third quarter of 2016 compared to a year ago, according to Restaurants Canada’s latest Restaurant Outlook Survey. This figure is down slightly from 76% in the second quarter. In Q3, another 23% of respondents said their food costs were about the same while 5% experienced lower costs.

 

Most food prices fall

Relief may be on the way for operators as inflation rates for many food staples have plateaued or are declining. Following double digit gains in 2015, the price paid by consumers at grocery stores for beef was 3.2% lower in August 2016 compared to August 2015. Consumers also paid less for pork, pasta, fresh fruit and coffee. In contrast, the price of fish has increased in recent months.

Menu inflation hits a high

Menu inflation of 2.6% for the first eight months of 2016 is higher than average of 2.3% for the past five years. Some provinces are also reporting even higher year-over-year increases in menu prices. This spike is due to the rising prices for beef, pork and imported fruits and vegetables earlier this year, as well as growing labour costs.

cpiWhat to expect in 2017

With the moderation in food prices and the Canadian dollar to strengthen slightly in 2017, menu inflation is forecast to slip to 2.4% next year. Operators can expect to feel less pressure as this rate is more in line with the long-run average.

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