Higher-income households account for nearly six in 10 dollars spent in restaurants, and their numbers finally rose above pre-recession levels in 2014, according to the NRA’s chief economist Bruce Grindy. His Economist’s Notebook commentary and analysis appears regularly on Restaurant.org and Restaurant TrendMapper.
Household income continued to trend sideways in 2014, according to figures released today from the U.S. Census Bureau. Real median household income was $53,657 in 2014, which was essentially unchanged from its levels in each of the previous three years. In addition, 2014 median household income remained 6.5 percent below its recent cyclical high of $57,357 in 2007.
Despite the lackluster aggregate numbers, the number of higher-income households rose for the third consecutive year, which is a positive trend for the restaurant industry. The number of households with annual income above $75,000 numbered 45.1 million in 2014 – up 8.6 percent from a total of 41.5 million in 2011. Put another way, there were 3.6 million more households with income above $75,000 in 2014 than there were in 2011, after adjusting for inflation.
The growth of the last three years followed a sharp decline in higher-income households during the Great Recession. Between 2007 and 2011, the number of households with annual income above $75,000 plunged 5.4 percent, or 2.4 million households.
Although the 45.1 million households with income above $75,000 surpassed the 2007 pre-recession high of 43.9 million, it still represents a smaller share of total households. Households with income above $75,000 represented 36 percent of all households in 2014, down from 38 percent in 2007.
Growth in the number of higher-income households is a good sign for restaurants, as this demographic group represents the majority of spending in the industry. According to data from the Bureau of Labor Statistics, households with incomes of $100,000 or higher are responsible for 40 percent of the total spending on food away from home, while households with incomes between $70,000 and $99,999 account for 18 percent of industry spending.