Consumers are still spending at restaurants despite inflation

Brooke DiPalma
·Senior Reporter
Updated ·3 min read
627

Americans are spending more money to dine out than they are on groceries.

Consumers spent more than $86.6 billion at restaurants in the month of January, up 24% compared to the same month in 2022, per the latest data from the U.S. Census Bureau. Spending on groceries, beer, wine, and liquor was up 5.3%, totaling about $78.9 billion last month.

This comes as the cost of food away from home outpaced the cost of buying groceries. Per the Bureau of Labor Statistics' (BLS) January Consumer Price Index (CPI), the cost of groceries was up 11.8% year-over-year, while dining away from home was up 8.2%.

Despite menu price increases to offset inflation at many restaurants and fast food chains, customers seem to be turning a blind eye to rising prices after being cooped up during COVID.

According to the Mastercard Spending Pulse survey, U.S. consumers said dining out is a priority, with demand for it growing 24.2% year over year.

Starbucks' latest earnings results proved this resilience among consumers, as it increased menu prices up 5% in a 12-month period as of Q4 2022.

In its fiscal first quarter results, the Seattle-based coffee giant saw U.S. same-store sales jump 10% with eight of its 10 highest sales days in the company's history. Starbucks reaffirmed its full-year guidance for 7%-9% growth in U.S. same-store sales with expectations to see more of a balance between the ticket size and transaction.

NEW YORK, NEW YORK - FEBRUARY 14: Meal prices are displayed in a window of a Brooklyn fast food restaurant on February 14, 2023 in New York City. The Dow was down in morning trading following news that the January consumer price index (CPI) report showed that inflation grew at a 6.4% annual rate, which was slightly higher than expected. (Photo by Spencer Platt/Getty Images)

"We understand that our customers are dealing with a lot of uncertainty and economic challenges, but we aren't seeing an issue with our demand today," Starbucks CFO Rachel Ruggeri told Yahoo Finance LIVE.

Meanwhile, COVID-19 era trends like off-premise dining and delivery are boosting spending at restaurants.

CEO Kevin Hochman of Brinker International, Inc., owner of Chili's and Maggiano's Little Italy, told Yahoo Finance, "The everyday off-premise guest eating at home, they're coming more often, so we're seeing frequency and we're seeing growth." Compared to pre-pandemic, off-premise sales are up 82% for the restaurant chain.

He added, "Maggiano's wasn't immune to that [delivery orders pre-COVID], but what we found out — it's an incredibly sticky channel for that brand. Italian food travels great. We were really well positioned to get after it in terms of value."

For Chili's, Hochman noted the the brand offers value, which keep customers returning without any pushback to the higher prices it put in place.

Kearney Consumer Lead Katie Thomas told Yahoo Finance that when consumers question if they should go out to eat or cook at home, "the consumer is really in the driver's seat."

She said, "They feel empowered to make those trade-offs [dining out versus at-home] and they can really think about where do I want to spend my money and how is it going to be spent across the whole wallet, not just category by category."

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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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