USDA: menu price hikes to outpace rises in grocery food prices in 1988

Nation's Restaurant News, Feb 1, 1988

USDA: menu price hikes to outpace rises in grocery food prices in 1988

Restaurant menu prices will rise by 3 percent to 5 percent in 1988, outstripping anticipated increases in the price of food sold in supermarkets by at least a percentage point, the U.S. Department of Agriculture projected.

Preliminary figures from the agency signal a sharp departure from the 1987 picture, when menu and retail-food prices ascended at almost the same pace. Food consumed away from home rose in price by 4.1 percent, while food eaten at home escalated 4 percent, according to USDA preliminary data. Prices for all food increased by an average of 4.1 percent.

In contrast, prices for all food will move upward this year by 2 percent to 4 percent, spurred by the increase in restaurant menu prices. The price of food sold in supermarkets will remain flat, rising at most by 2 percent, the USDA projected.

Although the food suppliers' marketing costs will increase at the same pace as the nation's overall rate of inflation, expected lower farm price levels should offset the rise, the agency said.

Also factored into the USDA forecast for 1988 is the expectation that consumer demand for food will stabilize this year because of general economic conditions.

"Economic growth is expected to continue at a modest rate. Unemployment is not likely to increase, and disposable personal income will increase at a slightly stronger rate," the agency said.

Even with these positive factors, agency officials said, "consumer demand for food in 1988 is not likely to strengthen as a result of increased income."

According to the agency, the prices for fresh fruit are expected to increase again this year but at a much lower rate than in 1987.

But, the USDA said, fresh vegetable prices "are likely to remain stable if not fall slightly" in the coming year.

The agency reported that poultry was in strong demand not only in grocery stores, "but by fast food chains" that "had heavily promoted new chicken items on their menus," causing poultry prices to "increase sharply."

"Retail poultry prices will likely be down 6 percent to 10 percent from 1987," said the USDA, and the "lower prices of competing pork and poultry will prevent beef prices from rising much above 1987 levels."

The agency predicted that retail prices for pork could drop by as much as 12 percent, and the charge for other meats, excluding beef and veal, will decrease 3 percent to 4 percent.

Beef retail prices should remain flat, inching upward by no more than a percentage point, the department said.

However, fish and other seafood prices will be subject to their second year of strong increases. The agency expects price increases of nearly 11 percent over those of 1986, partly owing to limited supplies throughout the world and the declining value of the dollar. That projected increase is the highest of all retail food items included in the Agriculture Department listing.

The next highest jump predicted by the department is for prepared foods, such as frozen entrees, which many in the restaurant industry contend have increased in popularity at the expense of restaurant sales. The agency said groceries would raise the price of prepared foods by 3 to 5 percent.

The USDA attributed last year's rise in food prices to higher farm prices and rising processing and distribution costs.

Table: USDA FOOD PRICE OUTLOOK