The US economy is still in the midst of recovery. And though consumers are still uncertain about our economy, their opinion of recovery has been trending toward a positive direction since 2010. 2015 saw steady growth in employment and disposable personal income along with modest wage and salary gains. Still, 80% of consumers feel the economy is either poor (40%) or just fair (40%). It turns out last year was the strongest in terms of recovering from the Great Recession, but consumers believe we have a long way to go before they’ll describe the economy as good or excellent.
According to research conducted by the National Restaurant Association, this is what we can expect through the end of 2016.
Economic Growth Remains Modest
Growth is projected to be slower than it was in 2015. While total US employment increased by 2.1 percent in 2015, the NRA predicts that 2016 will only see an increase of 1.8 percent. Economic growth will likely continue at a steady pace, more jobs are available, home values are on the rise, gas prices are down, and debt burdens are lower. Consumers may not feel positive about our economy but the data shows that they are in better financial positions than they have been in recent years.
Higher-Income Households Surpass Pre-Recession Levels
The majority of spending in the restaurant industry comes from higher-income households. Analyzing data from the US Bureau of Labor Statistics, the NRA says that households with incomes of $100,000 or more account for 40% of the total spending on food away from home. Households with incomes between $70,000 and $99,999 represent 18% of restaurant spending. Looking at 2011 through 2014, the number of households with annual incomes of more than $75,000 is on the rise. According to the NRA’s interpretation of BLS data, in 2014 there were 3.6 million more households with an annual income above $75,000 than in 2011 (after adjusting for inflation). This trend in growth in high-income households bodes well for the restaurant industry.
Food Prices Predicted to Trend Downward
In 2015, average wholesale food prices dropped by 2 percent. In contrast, average wholesale food prices increased approximately 25 percent. According to projections from the USDA, operators should expect the downward trend of average wholesale food prices to continue from 2015. Restaurants in primary markets can expect beef prices to fall to somewhere between 4% and 11 percent. Pork and dairy prices should also fall.
International Tourism to Grow
Restaurant operations reflected 2015’s slow international tourism growth. It’s estimated that 75.3 million international tourists visited the US in 2015. That’s an increase of just 0.4% over 2014’s 75 million international visitors. Casual-Dining, Quickservice and Fast-Casual operators reported a net decline in tourists and travelers as a percent of their sales. Only Fine-Dining operators reported a net increase in sales due to international visitors. The Office of Travel and Tourism Industries (OTTI) has projected that 77.3 million international travelers will visit the US in 2016. They are expected to spend more than $100 billion on goods and services, including restaurants.