Is Inflation Happening Now?  McDonalds Says…

…Yes, but they’re holding off on price increases until they see whether and how the economy’s improving.  This little tidbit, along with information gleaned from other restaurant executives, is presented in an article on Agweb, a commodities business site.

The question of whether the economy is suffering from inflation or deflation – or even what I refer to as hyperstagdisindeflation – has been the debate for months and it’s only now that further information is becoming available to clarify the picture.  The gist of the article is that restaurant chains have been seeing commodity price increases but have been successful thus far in mitigating the rises via contract lock-ins, addition of new producers and old-fashioned sucking up the prices and taking the bottom line hit.  However, they’re watching the economy’s general performance to ascertain when things are sufficiently recovered to pass along the prices to the consumer.  When the consensus is that recovery has taken hold, then expect to see price increases as the restauranteurs move to recapture some of the profit margin that they might have given up.  If the economy, which they’re measuring by the unemployment rate, doesn’t improve then they’ll have to hold off as long as possible before finally giving in to meal price increases.

As my wife asks, what does this mean for my family?

As I’ve occasionally told her, choose your poison.  Our stated unemployment rate (U-3) is now at 9.8% and the more realistic U-6 rate is above 17% and the average family income continues to decline so there’s no leeway in free disposable income.  People will continue to cut back on restaurants and there will come a time when the average restauranteur is faced with no choice but to raise prices or fold.  So we can keep bumping along with no real employment/wage improvement and keep the prices level or we can watch jobs grow and the prices rise at a rate likely higher than the wages. 

What this means for this particular family is that despite the chaotic schedules, my plan is to almost completely eliminate restaurant dining in 2011 in favor of fully home cooked food.  We reached the point at which it was easier to grab a quick restaurant meal for sake of the schedule but the drive to cutback spending will simply require that the family and I adapt our palates and expectations accordingly.  I’ll still see price rises in the grocery store but will still be able to manage it better than just throwing money down a restaurant’s hole.

While McDonald’s sounds respectable for keeping things under control, the time will come when they choose the profit margin over the typical American family.

Leave a Reply

Your email address will not be published. Required fields are marked *