Same-store sales slowed further in July, according to the latest Black Box Intelligence index, as the restaurant industry appears to be in the midst of another summer lull.
The key industry metric declined 1% in July, slowing further from June despite easier comparisons.
It was the worst performance for the industry in nearly two years, according to the monthly index, which is owned by restaurant data company TDn2K and is based on weekly sales from more than 170 brands and 31,000 locations.
Traffic, meanwhile, continued to tumble, declining 4% during the month, a slowdown of 0.8 percentage points from June and the weakest result since August 2017.
July has proven to be a troublesome month for the industry in recent years, with consistently poor results dating back to 2017. Since 2016, chain restaurants’ same-store sales have declined by 3.3% during this month. All other months have seen a 1.1% three-year decline, according to Black Box.
“July’s unique challenges for chain restaurants play a significant part in the downfall we saw in the results,” Victor Fernandez, vice president of insights and knowledge for TDn2K, said in a statement. He said that as customers depart from their usual routines, they tend to shift toward other options for their dining.
One notable problem for the industry last month was takeout sales. Those sales had been providing a lift for the industry for some time, but they slowed by 2 percentage points since June.
To be sure, July slowdowns have proven temporary in recent years and this one may be no exception.
But now the industry could face a potential recession. Joel Naroff, president of Naroff Economic Advisors and a TDn2K economist, said recent ratcheting up of tensions with China could push the economy into a recession.
The U.S. is threatening tariffs on Chinese imports, and China recently devalued its currency and stopped making agricultural purchases. Those disputes mean “the longest-running expansion in American history is at risk,” Naroff said.
He said it’s difficult to do more than speculate on growth going forward, given the political issues. Naroff said that if both China and the U.S. back down, the economy is on solid enough footing to avoid a recession.