This hasn't happened to restaurant spending since the pandemic

By Jeffry Bartash

Sales have fallen in four of the past six months

A sign of financial stress? Sales at bars and restaurants in the U.S. have fallen in four of the past six months for the first time since the pandemic.

Restaurant spending is often a good cue for the health of the broader economy. People spend more on takeout or dining out when they have some extra money and feel optimistic; likewise, they pare their spending when they feel financial stress.

The persistence of high inflation and slower growth in incomes is putting a squeeze on household budgets, economists say.

"Retail sales have been volatile month-to-month so far this year as more consumers struggle under the weight of rising prices, higher interest rates, and dwindling savings," said chief U.S. economist Scott Anderson of BMO Capital Markets.

When that happens people tend to cut back on so-called discretionary spending - that is, goods and services they want to buy.

A new survey by KPMG, for instance, found that 41% of consumers said they plan to spend less on restaurants this year. Only 21% said they would spend more.

By contrast, a larger share of Americans had said they planned to spend more at restaurants in the same survey in 2023.

A big part of the reason people plan to cut back on eating food outside the home is because of persistent inflation.

The cost of takeout and dining out has risen 4% in the 12 months ended in May. And prices to eat out are up a whopping 35% since the pandemic.

Grocery prices have also surged since the pandemic, but they have only risen by 1% in the past 12 months. That makes eating at home relatively cheaper.

While receipts have risen 3.8% in the past year, sales are rising more slowly now compared to the 5.5% annual increase in the decade before the pandemic. And sales have outright declined since December.

-Jeffry Bartash

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06-18-24 1204ET

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