Fifth consecutive year of restaurant sales growth, but consumers are still wary.
In his latest commentary, the National Restaurant Association's Chief Economist Bruce Grindy projected restaurant sales growth to post its fifth consecutive year of real sales growth in 2014, driven by an improving economy and elevated levels of pent-up demand. However, consumers remain in a recession mindset, which continues to dampen overall growth.
Restaurant-and-foodservice sales are projected to total $683.4 billion in 2014, up 3.6 percent from 2013's sales volume of $659.3 billion. In real terms, sales are projected to rise 1.2 percent in 2014, up slightly from a 1.0 percent gain in 2013. Sales growth in 2014 will be driven by an improving economy and elevated levels of pent-up demand among consumers. When asked in December 2013 if they were using restaurants as often as they would like, more than four in 10 consumers said no. In comparison, during the stronger restaurant business environment of the mid-2000s, typically only one-quarter of adults said they would like to be patronizing restaurants more frequently.
This measure of pent-up demand is elevated by historical standards, and suggests that consumers' appetite for restaurants remains largely unfulfilled. However, as much as they would like to increase spending, consumers continue to hold back because they remain stuck in a recession mindset.
In a December 2013 survey fielded by the NRA, three of four adults said they were concerned about the economy and had cut back either "significantly" or "somewhat" on spending. Only one of four consumers said they were confident in their financial situation and had not cut back on spending.
Consumers remain stuck in this recession rut despite the fact that the economy has added nearly 7 million jobs since the depths of the recession. This sentiment also explains why restaurant sales growth remains below what would be expected during a normal post-recession period. Coming out of the previous four recessions, restaurants registered at least three consecutive years of real sales growth above 2 percent. In the four years that followed the Great Recession, real sales growth topped out at 1.7 percent.
If the economy improves as anticipated and job growth accelerates in 2014, look for consumers to start burning off some of their accumulated pent-up demand for restaurants.