Economic Outlook

Consumers Pressured by Huge Inflation

  • Consumer spending headwinds include: significantly higher costs for groceries, gas, utilities and rent; higher interest rates; and an end to the last of the government stimulus (the childcare tax credit expired at the end of December).

Commodity & Labor Costs

Ramping Inflation Prospects  

  • Commodity prices continue to move higher and Brinker expects recent commodity inflation of +3.5% to +4% will ramp-up to HSD during 1H:22 (pressured by pork & chicken). While there is a sufficient supply of chickens, staffing shortages in the supply chain are pressuring processing.
  • Elevated transportation costs (with an 80,000 shortage in truckers according to the American Trucking Association) further pressures food costs.
  • Denny’s rule-of-thumb is that 10% commodity inflation can be offset by +2% to +2.5% in pricing.

  • Also, labor shortages are impacting wage rates and, although the total number of foodservice & drinking places employees continues to grow, it still remains below 2019 levels despite a recovery in industry sales.

  • Building material prices continue to surge with lumber futures up +39% m/m in December.