Reply #6: Restaurants Lift Prices as Inflation Hawks See Fed Behind Curve

[Pale Blue Dot]

Dining out will cost more this year as U.S. restaurants take advantage of the nearly two-year long expansion to boost prices on food and drinks.

Higher-priced menus reflect growing confidence by eateries that consumers can afford to pay more to eat out. Restaurants are emboldened in part by the success of U.S. airlines, which have raised fares almost 10 percent since a year ago, according to Dean Maki, chief U.S. economist at Barclays Capital in New York.

“The fact that the airline industry was able to pass along cost increases signals that the pricing environment has become somewhat more favorable than it was during the heart of the recession,” Maki said. “It’s more likely restaurants will be able to pass along price increases now relative to the last few years.”

Higher food and fuel costs are spurring menu changes, which are reflected in the food-services category of the personal- consumption-expenditures price index. Purchased meals and beverages, which make up about 6 percent of core PCE, rose nearly 2 percent in March from a year ago, the biggest increase since November 2009, according to data from the Bureau of Economic Analysis in Washington.

http://www.bloomberg.com/news/2011-05-06/restaurants-raising-prices-in-trend-inflation-hawks-cite-to-criticize-fed.html