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In September, YoY CPI growth for Food at Home increased by 30 basis points versus August to 6.3%.  CPI for Food Away from Home fell to 2.6% in September from 2.7% the month prior.

Food costs are now the key line item in Americans’ P&L’s according to WMT’s commentary during its earnings call two months ago.  BLS data released this morning detailing the Consumer Price Index in September suggests that the spread between food at home inflation and food away from home inflation grew wider for a tenth consecutive month. 

As we have written before, as long as grocery inflation continues to outstrip price increases in restaurants, it should be a positive for comparable sales trends at restaurant chains.  Whether or not restaurant margins can withstand the pressure or not, however, remains to be seen. 

The Knapp Track data, as we wrote about on Monday morning, suggests that the third calendar quarter finished strongly for casual dining.  The CPI data released today provides another bullish data point for the restaurant space with respect to traffic; to the extent that the more severe inflation in the grocery aisle relative to the restaurant dissuades people from eating at home, it is a positive for restaurants’ guest counts.  However, it is important to note that effective food prices remain high for many restaurant companies.  Despite spot prices for most foodstuffs declining recently, contracts and inventories need to be worked through in order for companies’ margins to derive any benefit, or relief, as inflation subsides.

SEPT FOOD AT HOME CPI ACCELERATES AS AWAY FROM HOME SLOWS - food away from home food at home

Howard Penney

Managing Director

Rory Green

Analyst