Edit

Stock-market slip not likely to have ‘large or immediate’ effect on restaurant sales

U.S. consumer confidence reached a seven-month peak prior to Monday’s stock-market decline—underscoring recent spending growth seen in the restaurant industry.

The Conference Board said Tuesday that its consumer confidence index increased to 101.5 in August, its strongest showing since January. The index rose 10.5 points from July to August, according to the non-profit research group.

“Consumers’ assessment of current conditions was considerably more upbeat, primarily due to a more favorable appraisal of the labor market,” said Conference Board economist Lynn Franco. “The uncertainty expressed last month about the short-term outlook has dissipated and consumers are once again feeling optimistic about the near future.”

That confidence level may be somewhat tempered this week, as the U.S. stock market—which Monday saw an unprecedented 1,000-point drop—appeared to rally early Tuesday only to nosedive again by the time trading closed.

Yet stock-market slips, even ones as dramatic as Monday’s, generally “do not have a large or immediate effect on sales at stores, restaurants or other retailers,” economist Jay Zagorsky wrote in The Conversation.

Thanks to climbing consumer confidence and falling gas prices, the restaurant industry has been rebounding in recent months, clocking restaurant visits at levels unseen since the recession began and rising average checks that spurred even greater growth. If stock-market chaos continues, a downturn in consumer confidence could result. 

Still, a small dip in confidence may not spell doom and gloom for all concepts, particularly QSRs and fast-casuals, which often see an uptick in times of economic slowdown.

QSRs tend to dominate the industry when people still want to enjoy eating out but are “watching their wallets fairly closely,” Warren Solochek, vice president of client development for research company NPD Group, said in an interview last month.

And large concepts aren’t quickly jumping to concern. In his well-publicized memo sent to Starbucks employees Monday, the coffee giant’s CEO Howard Schultz held steadfast on the company’s expansion goals, noting that “growth plans for the future of our company will not be impacted by the turmoil of the financial markets.” 

Trending

More from our partners