Study Projects Compound Growth Rate for U.S. Foodservice Market

Restaurant sales in June were slower than in May. A new report looks for foodservice to grow 3.33 percent in the next 5 years. A C-store chain says it will open at least 600 locations in the next few years. Taco Bell expands their Cantina concept. These stories and a whole lot more This Week In Foodservice.

Restaurant sales fell in June according to the Census Bureau. While total U.S. retail sales rose 0.6 percent compared to May, sales at restaurants and bars declined 0.3 percent for the month. Still, total retail sales increased 3.1 percent for the first 6 months of this year and June sales increased 2.7 percent from June 2015. Excluding sales of autos and auto parts, June retail sales rose 0.7 percent. 

Restaurant and drinking places had sales increases of 6.4 percent in the first 6 months of 2016 and 4.9 percent compared to June 2015. It is probably worth noting that restaurant and bars sales increased a solid 0.8 percent in May.

There are some factors to consider when analyzing the Census Bureau report. First, the Bureau classifies it as an “advance” report since it is based on a small preliminary sample subject to revision. Second, the government only surveys restaurants and drinking places. Thus, the study excludes somewhere between 30 percent to 40 percent of the foodservice industry, including hotels, resorts, retail operations, clubs, employee foodservice, colleges and universities, school foodservice, healthcare, and military. Finally, some of the data is adjusted for seasonal variations, holidays, weekends, etc. but menu price changes are not factored into the numbers.

Economic News This Week

  • Consumer borrowing increased by 6.2 percent in May on a seasonally adjusted annual rate, according to the U.S. Federal Reserve. Revolving credit — mostly credit card loans — increased at a relatively low 3.0 percent while non-revolving credit — auto loans, student loans, etc. — rose 7.3 percent.
  • The Producer Price Index for Final Demand increased 0.5 percent in June on a seasonally adjusted basis. Final demand service prices rose 0.4 percent and final demand goods prices rose 0.8 percent. However, the prices of the “core” index — the goods index not including food and energy — was flat for the month. Final demand food prices increased 0.9 percent while final demand energy prices jumped 4.1 percent.
  • Initial jobless claims for the week ending July 9 were 254,000, identical to the week before. The 4-week moving average was 259,000, a decline of 5,750.
  • New rules regarding overtime wages may be phased in rather than take effect on December 1 of this year. Four members of Congress introduced legislation to phase in the rules over a three year period to hopefully give businesses time to adjust to the higher pay.
  • The Index of Small Business Optimism reached 94.5, an increase of 0.7 percent in June. The study’s sponsor, the National Federation of Independent Business, interpreted the results to mean that small businesses are “in a maintenance mode experiencing little growth…”
  • Can auto sales maintain a seven-year growth pattern? One forecaster looks for a “modest decline” in car and light truck sales this year but other observers predict a second record-breaking year.
  • Industrial Production rose 0.6 percent in June after falling 0.3 percent in May. Production for the manufacturing segment rose 0.3 percent, utilities production rose 2.4 percent due to warmer weather, and mining production was up 0.2 percent. Capacity Utilization increased 0.4 percent in June to 75.4 percent. This is 4.6 percentage points below the long run (1972-2015) average. 
  • The University of Michigan Index of Consumer Sentiment dropped significantly in the study’s preliminary July reading. The index declined to 89.5 from 93.5 in June. The Current Economic Conditions Index read 108.7, a decline of 2.1 points. The Index of Consumer Expectations was 77.1, down significantly from June’s total of 82.4. A spokesperson for the University of Michigan stated that a “record number” of respondents mentioned the Brexit vote as a concern. These were mainly consumers at high income households.

Foodservice News This Week

For details and same-store sales of other chains, please click here for the Green Sheet.

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