Tax Cuts Fail to Stimulate Restaurant Sales

Same-restaurant sales fell 0.3% in January, ending three straight months of flat or positive growth.

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.

Rosy Outlook?

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.

Macro Picture

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 Fed ignores its own survey which shows Household Spending Projections Continue to Slide.

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

Comments (16)
No. 1-16

More garbage hyperbole. Lets get real here. Most folks do not even know what the tax effects will be. This could take some time to play out. You cite some garbage restaurant graph. To make it more of a joke you cite a 1 month time frame. What about the freezing winter that had the USA frozen solid. Most folks stay home at that time. articles like this make me wish the internet never existed. stupid articles about stupid things written by even more stupid folks.

Mike Mish Shedlock
Mike Mish Shedlock


The trend in spending is pretty clear. Moreover, it appears you cannot read. I am not interested in one month numbers, I was offering analysis for the year. I laid out my reasons. It was Naroff, not me, who projected restaurant sales based on tax cuts. I gave a list of reasons I disagreed. You can agree with my reasons or not, but I laid them out. Please learn to read before making silly replies.

Mike Mish Shedlock
Mike Mish Shedlock


By the way, Klausmlk, your statement "Most folks do not even know what the tax effects will be", is in an of itself ridiculous. Here is the correct statement "No one knows what the tax effects will be". So if you wish to nitpick, start with your own silliness.


Mish - Please keep up the good work. Your site and Wolf Richter's seem to be the only places I can find objective information understandable by an amateur like myself. I appreciate your efforts. Illegitimi non carborundum. (Not real Latin!)


the cost of a nice piece of premium fish , a fresh vegetable and a glass of wine if i prepare it myself is now what it would have cost in a restaurant a few short years ago, at least where i am. the tax cut and i think i may actually have one since i don't itemize and in a high tax blue state would cover just a handful of dinners. it's not as much as most people think and does ignore that other costs are going up. i agree with you mish, in that the tax cut barely counteracts everything else eating away at consumers spending power. the savings rate is a key number to look at.