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As our global and regional economies strive to reawaken, inflation costs have surged for many industries and consumers around the world. The US commercial foodservice and hospitality sector was hit particularly hard by rising inflation costs.

Rising shipping cost, materials, transportation bottlenecks, commodity shortages, and increased cost to retain employees are just some of the factors contributing to the rising expense and capital needed for restaurant operations. As more consumers eagerly venture back out into the world, restaurants cannot handle the demands as it outpaces the supplies available, in turn, driving up prices.

Inflation as a Global Trend

According to the United Nation’s Food and Agricultural Organization’s (FAO) Food Price Index, countries around the world experienced the fastest rate of monthly price increases in more than a decade. What’s more, the drastic price increases this past May were already preceded by 12 consecutive months of inflation. When compared to a year-on-year basis, global food prices were up almost 40%, citing rising costs of cereal, vegetable oil, sugar, and meat.

The United States is in a unique position, as Taimur Baig, chief economist at the DBS Bank in Singapore explained in a recent interview, “Only the U.S. is presently characterized by labor shortage, rising union power, and rising wage demand … Nowhere in Asia or Europe do we see such markers.”

Why Are Restaurants Facing a Labor Shortage?

Our precariously distinctive position also puts strain on the restaurant industry as it is one of the sectors hardest hit by a labor shortage. The National Restaurant Association found that despite adding 186,000 food service and hospitality jobs in May, staffing sits at 12% below pre-pandemic levels.

With material costs snowballing and labor costs on the rise, restaurants in the United States are increasing menu prices out of necessity, some as high as 5%. In an attempt to stay afloat, some restaurants are also decreasing the amount of food they serve while charging the same price for smaller portions.

At this time, there is widespread disagreement amongst US economists and policymakers over whether prices will continue to climb.

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