U.S. Restaurant Prices See Largest Increase Since 1981 in July

In July, restaurant prices in the U.S. saw the largest increase since 1981 as they rose by .8 percent as consumers face rising costs across industries, the Associated Press reported.

The rise in restaurant prices comes alongside higher food costs as well as rising wages for workers in the food industry, retail and travel industry. Executives for the popular burger chain Shake Shack said the company is planning on raising prices in the last three months of 2021 from 3 percent to 3.5 percent. To offset the increase in raw material prices, Unilever, a consumer company that makes Ben and Jerry's ice cream and Dove soap, also said it will heighten some of its costs.

"We believe June marked the peak in the annual rate of inflation," said Oxford Economics economist Kathy Bostjancic. "That said, price increases stemming from the reopening of the economy and ongoing supply chain bottlenecks will keep the rate of inflation elevated."

The owner of fast food chains KFC and Taco Bell, Yum Brands, also said its businesses have increased their prices but just moderately.

For more reporting from the Associated Press, see below.

Shake Shack Restaurant
In July, U.S. restaurant prices saw their largest increase since 1981. In this photo, a bicycle delivery person stands near a Shake Shack in Midtown on February 8, 2021 in New York City. John Lamparski/Getty Images

Prices for U.S. consumers rose last month but at the slowest pace since February, a sign that Americans may gain some relief after four months of sharp increases that have imposed a financial burden on the nation's households.

Wednesday's report from the Labor Department showed that consumer prices jumped 0.5 percent from June to July, down from the previous monthly increase of 0.9 percent. They have increased a substantial 5.4 percent, though, compared with a year earlier.

Excluding volatile energy and food prices, so-called core inflation rose 4.3 percent in the past year, down slightly from 4.5 percent in June — the fastest pace since 1991.

Americans continue to face higher costs, with the year-over-year inflation rate matching June's increase as the largest annual jump since 2008. At the same time, some recent drivers of the inflation surge slowed last month. The price of used cars, which had soared over the past three months, ticked up just 0.2 percent in July. Airline fares, which had been spiking, actually declined 0.1 percent in July.

Rising inflation has emerged as the Achilles' heel of the economic recovery, erasing much of the benefit to workers from higher pay and heightening pressure on the Federal Reserve's policymakers under Chair Jerome Powell, who face a mandate to maintain stable prices.

Inflation is also threatening to become a political liability for President Joe Biden, whom Republicans in Congress have blamed for contributing to accelerating inflation from having pushed through a $1.9 trillion financial aid package last spring that included stimulus checks to most households and federal supplemental unemployment aid. Further trillions in spending, backed by Biden and congressional Democrats, will be considered by Congress in the coming weeks.

In response, Powell and the White House have said they believe that the pickup in inflation, which well exceeds the Fed's 2 percent annual target, will prove temporary because it stems mainly from supply shortages resulting from the sudden shutdown — and swift reopening — of a $20 trillion economy.

Still, the Biden administration sought Wednesday to rein in oil and gas prices, which have also spiked in the past year, by calling on OPEC nations to boost oil production to help support the global economy.

July's inflation report suggested that while price increases are easing, they aren't yet falling back as much as the White House and the Fed hope they will. The cost of auto rentals, for example, skyrocketed nearly 7 percent in the past year after rental companies sold off much of their fleets during the pandemic in order to raise cash. Yet last month, vehicle rental prices fell nearly 5 percent, a sign that the price spike may be reversing. Auto insurance prices also fell in July after having risen for six straight months.

Some categories are still recording price increases, but they are likely to moderate in the coming months. Hotel room costs, for instance, jumped 6 percent in July and have increased nearly 22 percent compared with a year ago. Lodging firms have struggled to hire enough workers to keep up with a travel burst as the pandemic faded this spring. But increases that large are unlikely to continue.

New car prices, which increased 1.7 percent in July, have leapt 6.4 percent in the past year, the largest year-over-year increase since 1982. A shortage of semiconductors has limited automakers' output, and there is little sign that it is easing yet. Nissan said yesterday that it is closing a huge factory in Tennessee for two weeks because of the chip shortage.

And rents are rising as many would-be homebuyers are forced to stay in apartments because house prices have soared in the past year, making them unaffordable to many. One rent gauge, which makes up one-quarter of the overall consumer price index, increased 0.3 percent last month and could continue rising in the coming months.

A steady chorus of Fed officials have been suggesting that the Fed's goal of making progress toward annual inflation modestly above 2 percent has been met and that the central bank should begin paring its $120 billion in monthly bond purchases. The purchases, which began in March 2020 when the pandemic shut down the economy, have been intended to hold down long-term loan rates to spur borrowing and spending.

Eric Rosengren, the president of the Federal Reserve Bank of Boston, said Monday in an interview with The Associated Press that underlying inflation, excluding the price spikes caused by supply shortages and the economy's reopening, has sustainably topped 2 percent, the Fed's target.

Some other Fed officials, though, including Powell himself and Governor Lael Brainard, have said they want to see more data before committing to any pullback of the Fed's stimulus efforts.

Some companies are still raising prices to offset higher costs for parts and labor.

North Carolina Restaurant Dining
A member of the wait staff works between tables at Four Corners restaurant as people dine outdoors in Chapel Hill, N.C., Friday, April 16, 2021. Gerry Broome/AP Photo