Worst Restaurant Recession since 2009 Digs Inflation
by Wolf Richter
WolfStreet.com
Aug 14, 2017
Households at lower 80% of income scale are maxed out.
“July proved to be a tough month for chain restaurants,” the report said.
Foot traffic at chain restaurants fell 4.7% in July year-over-year. Same-store sales fell 2.8%, the 17th month in a row of year-over-year declines, the longest downturn since 2009.
On a two-year basis, same-store sales fell 4.2% from July 2015, and traffic fell 8.7%.
Sales rose in only 12 markets and fell in 183 markets. California was once again the least bad region, with same-store sales down 0.7% and foot traffic down 3.6%. In other words, no region had positive results. The Midwest was the “worst region” with sales down 3.6% and foot traffic down 5.2%.
“While the economy keeps growing at a moderate pace and job gains remain strong, the consumer seems to be on vacation – literally and figuratively,” said the report by TDn2K whose Restaurant Industry Snapshot tracks sales at 27,000 restaurant units from 155 brands, generating $67 billion in annual revenue. That’s about 10% of total “eating and drinking places” revenues as tracked by the Commerce Department. The report added:
“One of the clearest indicators that households are spending cautiously is the softening of big-ticket purchases. In July, for the eleventh month out of the last twelve, vehicle sales were below the rate posted the year before. Home sales, while still trending up, are now expanding at a decelerating pace.”
Food sales were down, and alcohol sales were down. Prices were up — the average amount per check rose 1.8% in July – but it wasn’t enough to make up for the decline in customer count. The report blamed consumers that were maxed out:
“[H]ouseholds are currently maintaining their lifestyles by reducing their savings rate, and that is likely restraining spending on discretionary goods. We may have to wait until the fall or early winter, assuming wage gains accelerate by then, to see any pick up in restaurant sales.”
So everyone is waiting for wage increases for the lower 80% of the wage earners that will finally outgrow inflation. That’s all it would take to crank up the economy, and even the restaurant business. People have been waiting for years for these real wage increases. But it’s just not happening.
The Rest…HERE
