The restaurant industry appears to be reaping the benefits of falling gas prices, as sales continued to trend higher in September. This boost in cash on hand, along with consumers’ elevated pent-up demand for restaurants, suggests that the business environment for restaurants should continue to improve in the months ahead, according to the NRA’s chief economist Bruce Grindy. His Economist’s Notebook commentary and analysis appears regularly on Restaurant.org and Restaurant TrendMapper.
Gas prices continue to trend steadily lower, and the restaurant industry appears to be among the sectors reaping the benefits. According to preliminary figures from the U.S. Census Bureau, eating and drinking place sales totaled $48.1 billion on a seasonally-adjusted basis in September, up 0.6 percent from August and the strongest monthly volume on record.
The September performance represented the seventh increase the last eight months, and each of the monthly gains were at least 0.4 percent. The most recent growth mirrored a downward trend in gas prices, which fell $0.50 since the end of June. This boost in consumers’ disposable income typically benefits discretionary sectors like restaurants, in which a large proportion of the growth is driven by cash on hand.
Despite the recent upward trajectory in sales, consumers’ unfulfilled demand for restaurants still remains elevated in historical terms, according to new National Restaurant Association research.
In a national survey of 1,000 adults conducted October 2-5 for the NRA by ORC International, consumers were asked if they are using restaurants as often as they would like. The answer was an emphatic no, with 42 percent of adults reporting they are not eating on the premises of restaurants or using takeout or delivery as frequently as they would like.
Putting these results in a recent historical context, consumers’ pent-up demand has eased somewhat from a year ago at this time. In an identical survey fielded in September 2013, 47 percent of adults said they are not eating on the premises of restaurants as frequently as they would like, while 49 percent said they would like to utilize take-out and delivery more often.
However, unfulfilled demand still remains well above pre-recession levels. On a consistent basis during the stronger economic environment of the mid-2000s, typically only one-quarter of adults said they were not patronizing restaurants as often as they would like.
Consumers’ elevated pent-up demand for restaurants, combined with the economic boost that they will get from a stronger job market and falling gas prices, suggests that the business environment for restaurants should continue to improve in the months ahead.