Americans have stopped going to restaurants

in economy •  2 months ago

    Is this because eating out has fallen out of fashion, or is it a harbinger of something more serious?

    Here is a graph of the Restaurant Performance Index, compared to US Retail Sales excluding Autos and gasolene:


    source

    Usually both lines move in tandem. The exception is in the lead up to recessions; then the Restaurant Index (blue line) drops first. It dropped in 2007, a full year before the Great Financial Crash.

    Because eating out is a discretionary luxury, when a consumer feels stressed due to either unemployment or rising prices, going to restaurants is the first thing to be cut. And when people have extra cash, treating themselves to a restaurant meal is the first thing they do (see 2004 and 2014).

    This time, the restaurant index is falling as fast as in 2007. It's a bad sign, because usually consumers then progress to cutting back on other spending, and before you know it, you have a recession.

    This might be the real reason the Fed cut interest rates by 50 basis points last month. Perhaps they're seeing something in the data that the financial press can't see. It's worth noting that the last time the Fed cut by 50 basis points was in Sept 2007.

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