Bruce Grindy is the National Restaurant Association's senior economist Check out Bruce's past articles.

Despite higher gasoline prices, restaurant-industry sales remain solid overall.

In spite of gasoline prices that jumped 73 cents, or 39 percent, in the last 12 months, restaurant industry sales remain solid overall, based on the latest data. Adjusting for inflation, total restaurant and bar sales hit a seasonally-adjusted record high in April 2005, before leveling off in recent months. Although edging down from April’s record high, sales remained well above their 2004 levels. Restaurant and bar sales totaled a seasonally-adjusted $33.8 billion in July, up 3.4 percent from their July 2004 sales volume, after adjusting for inflation.

However, that doesn’t mean all segments of the industry will perform equally. Establishments that are highly dependent on roadside traffic may be more affected by the negative impact of rising gas prices than local neighborhood restaurants. Consequently, a prolonged period of higher gasoline prices does have the capability to alter historical spending patterns within the industry. But clearly, although there has been some dampening in real sales growth in recent months, the overall restaurant industry continues to post sales substantially above 2004 levels.

Monthly Sales at Eating and Drinking Places
(Figures are seasonally-adjusted and adjusted for inflation)

Source: National Restaurant Association, based on Census Bureau data; in July 2005 dollars

Impact on Consumers

In general, lower-income households are disproportionately impacted by rising gas and energy prices. According to an Association analysis of data from the Bureau of Labor Statistics, gasoline expenditures for households with annual incomes of $70,000 or more represented just 1.7 percent of their pre-tax income in 2003. In contrast, households with annual earnings of less than $30,000 made gasoline expenditures that averaged 5.3 percent of their pre-tax income -– roughly three times the proportion of their higher-income counterparts.

In terms of restaurant sales, this suggests that over the longer-term, if gasoline prices remain strong, restaurants with smaller average per-person check sizes could feel a corresponding impact, if households are not able to fully absorb these additional costs.

Annual Expenditures on Gasoline as a Percentage of Total Household Income

Source: National Restaurant Association, based on data from the Bureau of Labor Statistics

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