Foodservice Equipment Reports

Presidential Race Is Dampening Consumer Spending Outlook, But NRA Dismisses “Restaurant Recession”

Almost a third of American consumers are less confident about their personal spending thanks to the highly negative rhetoric of the Presidential election race, according to a recent study of consumers commissioned by the National Restaurant Association. The survey, conducted August 18-21 by ORC International, was noted by the NRA’s Chief Economist Bruce Grindy in one of his “Economist’s Notebook” commentaries, released August 24. His commentary, “Five Reasons Restaurant Growth Will Continue,” was written in part as a reply to recent speculation that we are entering a “restaurant recession.” (See FER Fortnightly, August 3, 2016.)

Some observers and researchers have been troubled by a clear trend of falling same-store sales and negative year-on-year and month-on-month chain restaurant traffic counts. One factor named as a possibly contributor, given that most of the general economic fundamentals remain very positive for foodservice, is that the presidential election race is making consumers skittish about the direction of the country and the economy.

The ORC research does provide some evidence of such an effect. The net negative percentage point differential between those who said the election is making them more confident about their personal spending and those who answered less confident was 17 for all adults and 22 for women, who often control the household purse strings. Consumers aged 65 or older were the most negatively impacted with a negative differential of 31, while 18 to 34 year olds had a negative differential of only 8. Consumers in the Northeast and Midwest had higher negative differentials than those in the South and West. Households with incomes below $35,000, the bottom quintile, had the largest negative differential at 20 points.

Part of Grindy’s point was that the effect could be temporary and will dissipate once the election is over. The latest reading on national consumer sentiment from the University of Michigan, released August 26, recorded only a very minor decline in national sentiment, with the index down 0.2 point to 89.8 in August from a reading of 90 in July.

And Grindy offered five reasons he believes restaurant industry sales, which have grown 6% on an annualized basis through July since the beginning of the year, will stay on track: restaurant industry labor growth remains healthy; overall U.S. wage growth is accelerating, now exceeding 2.5% on an annual basis; the ratio of household debt payments to disposable income has fallen nearly three points since 2008 and is nearing a record low; pent-up demand for foodservice remains high, especially among lower income households; and consumers have been shifting their spending from things towards experiences, including eating away from home.

Grindy’s complete commentary can be found here.