Restaurant Performance is Consumer Sentiment

February 21, 2024
Restaurant Performance Index-3

The University of Michigan Consumer Sentiment survey might be the most arbitrary indicator for economic health. It consists of 500 monthly interviews. The respondents answer 50 questions on personal finances, business conditions, and buying conditions. There is no way I have the patience for 50 random questions, and something tells me that the people who have the free time are likely not the scions of finance and business in America.


Source: University of Michigan, Consumer Sentiment - fred.stlouisfid.org

Let’s replace the consumer sentiment with the National Restaurant Association performance index. Food is a staple, but eating out at a restaurant is not an everyday occurrence for most of us; it’s a treat. Cooking at home is one of the easiest ways to cut expenses when a budget gets tight. It is real-time; there is no lag in the data, and this information is a direct insight into how someone feels about their financial situation. The pandemic did throw a monkey wrench into the data when restaurants were shut down in 2020-2021. Not only was money saved by not eating out, but the Fed loosened the purse strings and handed out a lot of money, whether it was needed or not.

Restaurant demand and investment exploded in 2022, but it has settled with no expansion or contraction since then. Are Americans worried about their financial situation? Incomes have not kept up with the cost of housing, and Americans are cutting back and eating out less. Looking at the restaurant index, they are worried.