While today's GDP print had its good and bad sides, with personal consumption rising to the highest level since Q4 2014 offset by a surge in inventories alongside a sharp drop in net exports, one aspect of today's GDP report is especially notable: spending on eating out (i.e., food service chains) has continued to grow.
As shown in the chart below, in Q3 the boost to the economy from Americans eating out amounted to 0.31%, just fractionally below the 0.36% print in Q2 which was the highest since the last quarter of 1999.
In fact, if one combines the data from the most recent two quarters, the contribution from eating at restaurants is the highest going back all the way to 1992.
And while recent hurricanes may have provided a modest boost to this number, one possible explanation for the recent jump is that Americans are spending their extra cash from tax cuts on dining out. In addition, major restaurant companies have recently hiked menu prices to keep up with higher minimum wages and rent costs.
Recent industry data show restaurant sales are growing while customer traffic declines, resulting in higher average checks, according to MillerPulse figures cited by Bloomberg Intelligence.
What is surprising is that just a few days ago, McDonald US same-store sales missed expectations as guest counts dropped amid a rise in menu prices and fierce competition from Restaurant Brand’s Burger King, Wendys, Chick-fil-A and Yum Brands’ KFC and Taco Bell.
Meanwhile, across the industry, restaurants are increasingly pushing delivery and discounts to attract diners. Chipotle this year is muscling its way into the delivery market with DoorDash and Postmates tieups. Meanwhile, fast-food chains are locked in a battle to offer the cheapest burger.
Whatever the reason for the recent surge, it is clear that whatever money Americans have left over from he Trump tax cuts, instead of saving it, they are promptly spending on their favorite food outside the house.