This post is part of the On the Margin blog.
Much has been said recently about a potential “restaurant recession.” Same-store sales have taken a sudden, almost inexplicable turn for the worse beginning in March.
That has led to inevitable speculation that the restaurant industry is in the midst of a recession that may or may not be a precursor to a full-blown economic slowdown.
Not so fast, says National Restaurant Association chief economist Bruce Grindy.
In a post on the association’s website, Grindy noted that weak sales and traffic don’t “paint a complete picture of the health of the overall restaurant industry.” Overall restaurant sales, according to U.S. Census data, have risen 6 percent, he said. Adjusting for menu price inflation, sales have risen 3.3 percent. The results suggest that the restaurant industry continues to expand after the recession, which is something we’ve noted before.
Grindy suggests other reasons why the restaurant industry isn’t bound for a recession.
For one thing, the labor market is healthy. The economy has added half a million jobs in the past two months, he noted.
All those new jobs have yielded fruit in terms of income. Last year, the median household income grew 5.2 percent, the federal government said Tuesday.
That was the best single year of growth since the Census Bureau began reporting data on household incomes in 1967. To be sure, such income growth has been rare in the post-recessionary period. But it suggests that consumers have more money to spend.
Meanwhile, Grindy said, household debt is rising, but households “are also building up a financial cushion” by saving more as they benefit from lower grocery prices and lower gas prices.
Plus, Grindy noted that consumers want to go to restaurants. In a survey for the association, 45 percent of adults said they’re not eating out at restaurants as they would like, while 46 are not getting takeout or delivery as often as they’d like.