Americans are eating out and buying more prepared foods because of the strong economy, but they’re paying a premium for doing so.
The cost of so-called food away from home — the government’s catchall category for eating out — has climbed 2.6% in the past year. That’s almost as much as the yearly increase in how much the typical worker earns per hour.
Yet the price of what the government calls food at home — groceries, in other words — has risen a much slower 0.5% in the past 12 months.
Many staples are cheaper now than they were a year ago. Milk, cheese, butter, coffee, sugar, cereal, ground beef, bacon and dried beans are among them, government figures show.
The only major foods whose prices have surged are eggs and, to a lesser extent, fresh seafood.
The divergence is nothing new. The price of groceries began to slow in 2015 and they outright fell in 2016 and 2017.
By contrast, the cost of eating out has continued to climb between 2% and 3% a year.
In many ways, it’s a good sign. Americans tend to eat out a lot more when times are good and cook more at home when the economy goes sour. And right now the economy is humming. Hiring is up, unemployment is way down and the stock market DJIA, +0.49% SPX, +0.49% is surging.
Spending on food prepared outside the home, for example, sank after the 2007-2009 Great Recession. Financially strapped Americans saved by making more home-cooked meals.
Only now is the portion of household budgets spent on prepared foods returning to prerecession levels. Soon it could even hit an all-time high.
Long decline in home cooking
The shift to eating more food made by others is part of a long-run trend. Twenty years ago, consumers spent almost 10% of their budget each year on groceries and about 5.5% on restaurants and takeout, according to the consumer price index.
The gap has since narrowed considerably — 7.2% vs. 6% — and it may have even disappeared in light of how much Americans spend buying prepared foods at grocery stores. Think salad bars, rotisserie chicken, macaroni and cheese and the like.
These purchases are counted in government statistics like food prepared at home.
The biggest increases in commercial-food prices in the past year have occurred in venues such as vending machines and monopolistic sites such as school cafeterias and work places. Prices have risen more than 3% in both categories.
Prices at full-service restaurants have risen more slowly.
Eating out or buying prepared foods, of course, is always going to cost more because of the extra labor involved. Sweeping increases across the nation in minimum wages may have also added to the upward pressure in the past few years.
And while families can save more by cooking at home, it does take time that’s often in short supply for millions of busy Americans. It’s a big tradeoff, but clearly one many people think is worth it.