Spending at U.S. restaurants surged over the past three months by the most on record.
As Bloomberg reports, sales at food-service and drinking establishments rose 1.3% in July to $61.6 billion, the Commerce Department reported this week, almost catching up to the total spent on buying food and beverages from grocery stores.
That brought the three-month annualized gain to 25.3 percent, the fastest pace in figures going back to 1992...
Three major factors may be driving this regime shift in spending:
First, Americans are eating out more and spending their extra cash from tax cuts on dining out (consumer confidence is elevated and the fiscal stimulus may be having an effect on the data);
Second, major restaurant companies have recently hiked menu prices to keep up with rising food costs, higher minimum wages, and rent costs (the retail figures are adjusted for seasonal variation but not for inflation); and
Third, across the industry, restaurants are increasingly pushing delivery services such as DoorDash to attract diners.
However, as Bloomberg notes, such historic gains caught the attention of economists.
Kevin Cummins and Michelle Girard at NatWest Markets said the figures indicate “...consumers remain quite comfortable with their personal financial situation and the economic outlook.”
Omair Sharif of Societe Generale noted that restaurants accounted for 30 percent of the July increase in retail sales but just 12 percent of the total.
“Any mean reversion here would lead to a noticeably slower pace of retail sales in the coming months,” Sharif wrote in a research note.
Industry data show restaurant sales are growing while customer traffic declines, resulting in higher average checks, according to MillerPulse figures cited by Bloomberg Intelligence analyst Jennifer Bartashus.