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A Restaurant That Actually Lowered Prices
It’s true. And it’s fantastic.
In the government’s latest inflation report, the cost of food away from home continued to rise. It’s up 8.5% year over year. (True, but not the fantastic part.)
As goods and services get pricier, restaurants pass the hit on to their customers.
No surprise. If you go out to eat, you know it keeps getting more expensive.
Even fast food. Nationally, you’ll pay 9% more this year than you did last for a burger, fries, and soda across fast-food chains. To see the most expensive cities and restaurants for fast food, check out last Friday’s Juice.
From fast food to taco stands to casual to fine(r) dining, everybody’s using whiteout on their menus.
But not San Francisco Chinese restaurant Lazy Susan.
In one of the nation’s most expensive cities for seemingly everything, Lazy Susan was about to follow the crowd and raise prices. Then it heard something interesting from its peers: Even though they increased prices, their average check decreased.
Lazy Susan’s management made an assumption: People are still eating out, but, thanks to inflation, they’re buying less expensive menu items. Maybe a bottle of beer over a glass of wine.
So Lazy Susan dropped its prices and, according to SF Gate, traffic popped by 15% and their average check went up 10%.
Gotta love it. As long as the food’s good. And we hear it is.
The million dollar question: All of these other restaurants. Will they bring their prices down when inflation cools?
Because it is going to cool. By a lot. The Juice has the latest on this now.
Inflation Around the World
The International Monetary Fund (IMF) released an interesting – and encouraging – outlook on global inflation.
It’s a whopping 186 pages. To save you time and trouble, The Juice read the entire thing while eating a $5 slice of pizza.
Everything’s Gonna Slow Down
In the United States, the IMF anticipates 1.6% economic growth to end 2022 and 1.0% for 2023. While lower than previous estimates, we’re still in positive territory.
As for U.S. consumer prices, the IMF calls for 8.1% inflation to end 2022, then sharp decreases to 3.5% in 2023 and 2.0% by 2027.
For historical context, consider the average annual inflation rate in the U.S. was 2.4% between 2004 and 2013. Before inflation hit 4.7% in 2021, it was as low as 0.1% in 2015 and peaked at 2.4% in 2018.
The point – we’re living through a moment in time.
As The Juice pointed out a few weeks ago, things have been much worse than they are now:
The 1970s and early 1980s were not great times in America.
Inflation hit double digits in 1974 (11.04%), 1979 (11.35%), 1980 (13.5%), and 1981 (10.32%). While our current 8.3% inflation rate doesn’t feel good, especially coupled with all the other bad news, at least we’re not in double digits like we once were and like they are right now over in the EU.
Speaking of the European Union.
The IMF thinks inflation will ease in the EU, just not as rapidly as in the U.S.
The EU will end 2022 with 8.3% inflation, dropping to 5.7% in 2023 and 1.8% by 2027.
Elsewhere around the globe:
The Bottom Line: Global inflation will cool. Amazing!
In the U.S., it will eventually get back to where we’ve seen it for most of the 21st Century.
However, this matters more:
Because most economists agree, you won’t notice easing inflation across the board. For example, while you might save money on energy (at the pump, for your home), items such as housing and the cost of food at restaurants will not necessarily pull back much, if at all.
While the year-over-year (5.1%) and June-to-September (1.3%) increases in wages and salaries for U.S. workers seems impressive on the surface, it’s still lower than inflation.
To really feel the effects of a return to the norm on overall inflation in your pocketbook, you need the amount of cash you’re bringing in to increase meaningfully. In other words, you’re always going to require more purchasing power to ease the brunt of $5 pizza and super high rents and housing prices.
However, the combination of a cooling economy and lower inflation might put a drag on your earnings. An equation we’ll dive deep on in upcoming editions of The Juice.
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