Consumer mindset may be improving

In a sign that consumers may finally be shaking off their recession mindset, retail sales trended steadily upward in recent months.  Eating and drinking places were among the sectors posting the strongest gains, and the outlook remains positive for the months ahead, according to the National Restaurant Association’s chief economist Bruce Grindy.

In a sign that consumers may finally be shaking off their recession mindset, retail sales trended steadily upward in recent months.  According to preliminary figures from the U.S. Census Bureau, total retail and foodservice sales rose 0.6 percent in August on a seasonally-adjusted basis, their seventh consecutive monthly gain. 

Overall, August retail sales stood 5 percent above year-ago levels, which represented the strongest 12-month gain in more than a year.

Eating and drinking places were among the sectors posting the strongest gains in recent months.  Restaurant sales totaled $47.7 billion on a seasonally-adjusted basis in August, up 0.6 percent from July and the strongest monthly volume on record. 

The August performance also represented the sixth increase the last seven months, and each of the monthly gains were at least 0.4 percent.  Overall, eating and drinking place sales were up 7.1 percent in the 12 months ending August 2014, their strongest 12-month gain in more than two years. 

Elsewhere, auto dealers (+9.5 percent), non-store retailers (+7.1 percent), drug stores (+8.1 percent), building supply stores (+6.7 percent), and sporting goods and hobby stores (+4.8 percent) all registered positive year-over-year sales growth, which suggests that consumers may finally be coming out of their shell. 

Looking forward, the positive underlying fundamentals suggest that we will see continued sales growth in the months ahead.  Despite the speed bump in August [please link to 9/5 notebook], national job growth is on a positive trajectory, and consumer confidence is at a seven-year high. 

In addition, gas prices are down $0.25 since the end of June, which puts additional disposable income in the pockets of consumers.  This typically benefits discretionary sectors like restaurants, in which a large proportion of the growth is driven by cash on hand. 

Read more from the Economist’s Notebook and get additional analysis of restaurant industry trends on the newly revamped Restaurant TrendMapper (subscription required).