After three months of flat or positive sales growth, the restaurant sector saw same-store sales fall 0.3% in January, according to data from industry tracker TDn2K. That’s bad news for a sector that was mired in recession until late last year, as consumers confronted higher prices for everything from rent to medical bills.
The data are based on TDn2K’s tracking of weekly sales from more than 30,000 restaurant units, representing more than 170 brands and $68 billion in annual revenue.
Joel Naroff, president of Naroff Economic Advisors and economist at TDn2K, said tax cuts should start to boost restaurant attendance soon. “Stronger growth in the 3% range looks likely this year and into 2019 as consumers spend the extra money in their paychecks and businesses increase their capital spending,” he said.
One bright spot in the January numbers was a positive performance for fine dining and upscale casual, the two segments that have outperformed for the last year. Business-related dining contributed to the climb in fine dining.
TDn2K vs Census Bureau
The lead-in Census Bureau chart from Fred shows year-over-year sale, not seasonally adjusted.
Here is a month-over-month comparison.
We can directly compare the January restaurant numbers to those of TDn2K when the Census Bureau releases the January numbers on February 14.
I believe Naroff has things wrong for many reasons.
- The savings rate has plunged. People need a wage increase just to maintain current levels of spending.
- The wage increase was far less than most believe and in fact may be a statistical mirage.
- If the stock market declines the wealth effect will go negative across the board, especially upscale and business spending.
- Wage Growth: Acceleration in Wage Growth is a Statistical Mirage
- Bill Paying Ability: Stock Ownership Rate Plunges as Credit Card Debt Soars
- Savings Rate Sinks: Personal Savings Rate: What's Going On? Can Spending Drive the Economy
Household Spending Projections
Here's the final kicker: The Fed relies on Consumer Confidence (Conference Board) and Consumer Sentiment (University of Michigan) surveys to predict consumer sales.
The spending projection trends are very clear.
And what if there is a recession? Everyone acts as if the odds are zero. They aren't.
Mike "Mish" Shedlock