Americans are Dining Out and Spending the Most on Record
Americans spending at restaurants spiked over the past 3 months by the most on record, making it both a bright spot for the economy.
Sales at food-service and drinking establishments rose 1.3% in July to $61.6-B,the US Commerce Department reported on Wednesday.That brought the 3 month annualized gain to 25.3%, the fastest pace in figures going back to Y 1992.
Such historic gains caught the attention of economists.
NatWest Markets said the figures indicate “consumers remain quite comfortable with their personal financial situation and the economic outlook.” Omair Sharif of Societe Generale noted that restaurants accounted for 30% of the July increase in retail sales, but just 12% of the total.
Mr. Sharif wrote in a research note, “Any mean reversion here would lead to a noticeably slower pace of retail sales in the coming months,”
One possible explanation for the recent jump is that Americans are spending their extra cash from tax cuts on dining out. In addition, major restaurant companies have recently hiked menu prices to keep up with higher minimum wages and rent costs.
He said the recent gains appear to reflect more people eating out more frequently, rather than just rising prices. The retail figures are adjusted for seasonal variation but not for inflation.
US consumer confidence is elevated and the fiscal stimulus may be having an effect on the data, citing a “very strong” pace of consumption gains in Q-2.
Industry data show restaurant sales are growing while customer traffic declines, resulting in higher average checks, according to MillerPulse industry figures.
Across the industry, restaurants are increasingly pushing delivery and discounts to attract diners. The fast-food chains are locked in a battle to offer the cheapest burger.