In his latest commentary, National Restaurant Association Chief Economist Bruce Grindy recaps the major economic indicators from the month of May. While the restaurant industry continues to face challenges, it has consistently outshined the rest of the economy in recent months.
With restaurant industry performance closely tied to the strength of the overall economy, it’s a good time to see if the recent economic softness is spilling over into the industry. To help sort out the latest trends, the following is a recap of a few economic indicators from May, and how the restaurant industry compares to the rest of the economy.
Sales: Restaurants were one of the bright spots in the Census Bureau’s May retail sales report. Eating and drinking place sales totaled $40.7 billion in May on a seasonally-adjusted basis, up 0.6 percent from April's sales volume of $40.4 billion and the second-highest monthly sales volume on record (March was $40.8 billion). May also represented the fourth consecutive month in which eating and drinking place sales topped $40 billion on a seasonally-adjusted basis.
In comparison, grocery store sales declined 0.4 percent in May on a seasonally-adjusted basis, after registering four consecutive strong monthly gains.
Meanwhile, overall retail sales (excluding foodservice) edged down 0.3 percent in May on a seasonally-adjusted basis, their first decline since June 2010.
Jobs: The restaurant industry continued to post steady job growth in May, with the 13,600 net new jobs representing the sector’s ninth employment gain in the last 10 months. Meanwhile, the national economy hit a speed bump in May, with the private sector adding only 83,000 jobs after posting gains of more than 200,000 jobs in each of the previous three months. While the private sector’s modest May performance was likely a temporary blip, it underscores the long and bumpy road that lies ahead until the economy fully recovers from the Great Recession.
Overall, the nation’s private sector lost more than 8.8 million jobs during the recession. Although it has added back 2.1 million jobs in the last 15 months, the private sector likely won’t be back to pre-recession employment levels until 2013 at the earliest. In comparison, while the restaurant industry shed 366,000 jobs during the recession, it already 226,000 jobs back since the recovery began. This puts the industry on pace to reach pre-recession employment levels by the end of this year or early in 2012. (See chart below.)
Source: National Restaurant Association analysis of Bureau of Labor Statistics data
Food prices: Although prices of many individual commodities remain at strong levels, the restaurant industry received a reprieve from the upward trend in May. According to figures from the Bureau of Labor Statistics, average wholesale food prices fell 1.3 percent in May, which followed gains in nine of the previous 10 months. In comparison, overall wholesale prices rose 0.6 percent in May (before seasonal adjustment), their 11th consecutive monthly increase.
Menu prices: Despite the sharp rise in food costs in recent months, menu price growth remained relatively modest, particularly when compared to the stronger gains in grocery store prices and overall inflation. According to figures from the Bureau of Labor Statistics, menu prices edged up 0.2 percent in May, which followed 0.3 percent gains in both March and April. In contrast, grocery store prices jumped 0.5 percent in May, their fifth consecutive monthly gain of at least a half-percentage-point. The last time menu prices registered a monthly gain of at least a half-percentage-point was October 2008, which illustrates the extreme pricing pressure that restaurants experienced during the challenging economic environment in recent years.
Overall, grocery store prices were up a strong 4.4 percent between May 2010 and May 2011, twice as strong as the 2.2 percent gain in menu prices during the same period. Menu price growth also remained well below the overall inflation rate, which stood at 3.6 percent in May.
For additional analysis of restaurant industry trends, log on to Restaurant TrendMapper at www.restaurant.org/trendmapper