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Economics in Everyday Life

Few expenses illustrate the changing nature of inflation as clearly as eating at home versus eating out. Through 2022 grocery prices rose faster than restaurant prices, peaking at about 5.5 percentage points higher in August. Restaurant prices continued to grow at a steady pace, overtaking grocery prices in December 2023. Since January 2020, restaurant prices are up by 37% and grocery prices 32%.

The difference reflects the distinction between goods and services. Grocery prices are heavily influenced by commodity and supply-chain conditions, which eased as pandemic disruptions decreased. Restaurant prices are more sensitive to labor and occupancy costs. Wages, unlike many commodity prices, are slow to fall, keeping service prices elevated even during disinflation.

This helps explain why the final stage of disinflation can feel particularly hard. Goods inflation can ease as supply constraints disappear, while service inflation remains tied to costs such as wages and housing that adjust more gradually. As a result, the end of an inflationary episode may be far less noticeable in everyday spending than its beginning.

Source: Consumer Price Index by category, U.S. Bureau of Labor Statistics. Chart shows CPI for food at home and food away from home, seasonally adjusted, January 2020 through July 2026.